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Models of Financial System Fragility

Listed author(s):
  • Iancu, Aurel

    ()

    (Complexity Research Department of the National Institute for Economic Research of the Romanian Academy)

This survey analyses two types of models: 1. Models based on assumptions of monetary and financial market equilibrium disturbance, in line with mainstream thinking according to which if there is a self-regulating market the units would have rational expectations, and the crisis would be a temporary phenomenon caused by exogenous shocks. Here are the main objectives and features characteristic of three generations of models; 2. Models based on financial instability hypothesis, taking into account the dynamics of financial market, as well as the role of uncertainty, interdependency and dynamic complexity. We present here Minsky’s concept of financial instability and then analyse the content of some simplified models.

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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2011)
Issue (Month): 1 (March)
Pages: 230-256

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Handle: RePEc:rjr:romjef:v::y:2011:i:1:p:230-256
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