Public Good Qualityoffinancialstabilityand Financialmarketfailures
An economy can only perform effectively, when there is a stable environment. Stability plays a critical role in raising social welfare, providing an environment for effective allocation of resources in an economy. Financial globalization, particularly liberalization of short-term capital flows, has given rise to both crises occurring more often and helping people to understand the importance of financial stability. Stability possesses two basic properties of public goods, non-rivalry and non-excludability in consumption. However, there would not be any demand in the markets for stability exactly for this reason and that makes instability easier to develop. Instability needs to be seen as a â€œpublic badâ€ since it causes heavy social and economic costs. Financial markets are critically important for economic stability, but they suffer serious asymmetric information problems that lead to problems of adverse selection, moral hazard and multiple equilibrium. The negative effects of asymmetric information problems are more intense in financial markets than other markets. Securities, equities and so on are exchanged in this market according to future return expectations and during this process behaviours of other market participants are critically important. Exactly in this point, a collective action problem that may trigger formation of a crisis appears. From the starting point that nowadays crises may strike even economies with strong fundamentals, this study focuses on the role of financial market failures in the process of a crisis development in aself-fulfilling manner.
Volume (Year): 7 (2007)
Issue (Month): 2 (December)
|Contact details of provider:|| Postal: |
Phone: (90) (222) 335-0580 x 2743
Fax: (90) (222) 320-1304
Web page: http://www.anadolu.edu.tr/akademik/birim/genelBilgi/205/3429/1
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:and:journl:v:7:y:2007:i:2:p:45-72. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Social Sciences Institute)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.