Theories of financial crises: An overview
AbstractThis paper analyses financial crises from a theoretical point of view. For this it reviews what different schools of economic thought have to say about financial crises. It examines first the approaches that regard financial crises as a disturbing factor of a generally stable real economy (Wicksell, Hayek, Schumpeter, Fisher, and the early Keynes). Thereafter, approaches, where the dichotomy between the monetary and the real sphere is lifted, are reviewed. Here in particular the later works of Keynes and the contributions of Minsky are of importance. Lastly, it is looked at the behavioural finance approaches. After having reviewed the different approaches, it is examined where those approaches have similarities and where they can be combined fruitfully. Based on this, we develop an own theoretical framework methodologically based on a Wicksellian cumulative process, however, overcoming the neoclassical dichotomy. The paper ends with some policy recommendations based on the developed theoretical framework. --
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Bibliographic InfoPaper provided by Berlin School of Economics and Law, Institute for International Political Economy (IPE) in its series IPE Working Papers with number 32/2014.
Date of creation: 2014
Date of revision:
financial crisis; crisis theory; behavioral finance; Hayek; Keynes; Minsky; Schumpeter; Wicksell;
Find related papers by JEL classification:
- E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-08 (All new papers)
- NEP-CBA-2014-03-08 (Central Banking)
- NEP-FMK-2014-03-08 (Financial Markets)
- NEP-HIS-2014-03-08 (Business, Economic & Financial History)
- NEP-HME-2014-03-08 (Heterodox Microeconomics)
- NEP-HPE-2014-03-08 (History & Philosophy of Economics)
- NEP-MAC-2014-03-08 (Macroeconomics)
- NEP-MON-2014-03-08 (Monetary Economics)
- NEP-PKE-2014-03-08 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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