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Income from Speculative Financial Transactions will always Lead to Macro-Economic Instability

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  • Tobias Schädler
  • Michael Grabinski

Abstract

Starting with a macro-economic model based upon the NAIRU (the nonaccelerating inflation rate of unemployment), we show that, in a world with no (speculative) financial transactions, the macro- economy shows a stable equilibrium state. Including income from (speculative) financial transactions will lead to instability if the amount is sufficiently large. Considering the present amount of financial transactions, stability is impossible. Therefore, further financial crashes are not only likely but inevitable.

Suggested Citation

  • Tobias Schädler & Michael Grabinski, 2015. "Income from Speculative Financial Transactions will always Lead to Macro-Economic Instability," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 5(3), pages 922-922.
    • Handle: RePEc:ers:ijfirm:v:5:y:2015:i:3:p:922
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    References listed on IDEAS

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    1. James Tobin, 1980. "Stabilization Policy Ten Years After," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1, Tenth ), pages 19-90.
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    Cited by:

    1. Galiya Klinkova & Michael Grabinski, 2017. "Conservation laws derived from systemic approach and symmetry," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 7(2), pages 1307-1307.

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