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Explaining Financial Crises : A Cyclical Approach

This book develops a new theoretical approach to the explanation of systemic financial crises in industrial and emerging market countries. In contrast to standard models, the present cyclical approach is consistent with the following three stylized facts. Firstly, systemic financial crises are a recurrent phenomenon generally accompanied by excessive boom-bust cycles. Secondly, the frequency of financial crisis cycles is very irregular. Thirdly, most financial crisis cycles are initiated by positive shocks to profit expectations which induce an unsustainable build-up of financial fragility driven by irrational exuberance. The present approach is based on a sophisticated balancesheet structure with many assets, as well as on an expectation formation scheme which combines the rational expectations hypothesis with Keynes’ Beauty Contest Theory

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Series Title
-
Call Number
650
Publisher
: .,
Collation
-
Language
English
ISBN/ISSN
9783631543504
Classification
650
Content Type
-
Media Type
computer
Carrier Type
online resource
Edition
-
Subject(s)
Business & Economics
Specific Detail Info
-
Statement of Responsibility
Other Information
Cataloger
rat
Source
https://openresearchlibrary.org/content/b85d428b-f31f-44dc-bc8a-a9ca62175789
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  • Explaining Financial Crises : A Cyclical Approach
    This book develops a new theoretical approach to the explanation of systemic financial crises in industrial and emerging market countries. In contrast to standard models, the present cyclical approach is consistent with the following three stylized facts. Firstly, systemic financial crises are a recurrent phenomenon generally accompanied by excessive boom-bust cycles. Secondly, the frequency of financial crisis cycles is very irregular. Thirdly, most financial crisis cycles are initiated by positive shocks to profit expectations which induce an unsustainable build-up of financial fragility driven by irrational exuberance. The present approach is based on a sophisticated balancesheet structure with many assets, as well as on an expectation formation scheme which combines the rational expectations hypothesis with Keynes’ Beauty Contest Theory.
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