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Disinformation and “Bad” Financial Speculations: A Mechanism behind Financial Crises

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  • Harashima, Taiji

Abstract

Some financial speculations are similar to gambling or Ponzi schemes because they are undertaken to extract other people’s economic resources. In this sense, there will be “good” and “bad” financial speculations. In this paper, I construct static and dynamic models of bad speculations and show that an important determinant of the amount of bad speculation is the economic cost (inefficiency) generated, particularly by disinformation that is disseminated for the speculation. The economic cost and amount of bad speculation are influenced by the ability and effort of regulatory authorities, and if that ability largely deteriorates, the amount of bad speculation will greatly increase and a financial crisis will occur. Hence, people must look for signs of deterioration of the ability of the regulatory authority to prevent financial crises.

Suggested Citation

  • Harashima, Taiji, 2025. "Disinformation and “Bad” Financial Speculations: A Mechanism behind Financial Crises," MPRA Paper 124877, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:124877
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    File URL: https://mpra.ub.uni-muenchen.de/124877/1/MPRA_paper_124877.pdf
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    More about this item

    Keywords

    Disinformation; Financial crisis; Financial regulation; Inefficiency; Speculation;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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