Causes of the financial crisis: Risk misperception, policy mistakes, and banks' bounded rationality
AbstractThis article describes important determinants of the current financial crisis. In particular, the text focuses on the bounded rationality of banks which contributes to the credit cycle. The credit cycle is the mechanism that links the present financial crisis with earlier crisis. Shortcomings on the side of monetary policy, rating agencies, and bank regulation are also discussed. We propose measures to strengthen the stabilizing effect of market forces, banks' risk management, as well as possible changes to regulation and monetary policy.
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Bibliographic InfoArticle provided by Elsevier in its journal The Journal of Socio-Economics.
Volume (Year): 39 (2010)
Issue (Month): 2 (April)
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Web page: http://www.elsevier.com/locate/inca/620175
Financial crisis Bounded rationality;
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