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Financial crises as herds: overturning the critiques Author info | Abstract | Publisher info | Download info | Related research | Statistics V. V. Chari
Patrick J. Kehoe
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Financial crises are widely argued to be due to herd behavior. Yet recently developed models of herd behavior have been subjected to two critiques which seem to make them inapplicable to financial crises. Herds disappear from these models if two of their unappealing assumptions are modified: if their zero-one investment decisions are made continuous and if their investors are allowed to trade assets with market-determined prices. However, both critiques are overturned-herds reappear in these models-once another of their unappealing assumptions is modified: if, instead of moving in a prespecified order, investors can move whenever they choose.
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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number
316.
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Date of creation: 2003Date of revision:
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Keywords: Financial crises ; Other versions of this item:
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repec:fth:coluec:602 is not listed on IDEAS
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Christian Hellwig & Arijit Mukherji & Aleh Tsyvinski, 2005.
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Broner, Fernando A, 2006.
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Levine's Bibliography
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CAMA Working Papers
2007-28, Australian National University, Centre for Applied Macroeconomic Analysis.
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