IDEAS home Printed from https://ideas.repec.org/p/sek/iacpro/0702344.html
   My bibliography  Save this paper

A Fundamental Cause of Economic Crisis

Author

Listed:
  • Koji Akimoto

    () (Kurume University in Japan)

Abstract

The purpose of this paper is to study a fundamental cause of the economic crisis which suffers the current capitalism economy. The basic approach we adopt is as follows.Firstly, we show that the capitalism economy cannot largely deviate from the balance which is defined by natural economy. Our attentions are focused on the balance between the real economic sector which produces GDP and the monetary sector which invests capital to the production of GDP. For the balance to be kept, there exists a rigorous range of the interest rate which the monetary sector can require from the real economic sector. The fundamental cause of economic crisis is the large deviation from this balance. Secondly, the capitalism economy is constructed by the economic agents who necessary accomplish their decision makings. Therefore, we construct our model by macro- economic game. Players of the game are the agents who are selected by the real economic sector and the monetary sector. Thirdly, we show that the deviation from the solution of the game is considered as the one from natural economy. Therefore, we conclude that the large deviation from the solution of the game is a fundamental cause of economic crisis.The game is defined by the macro-economic differential game with infinite horizon. In the usual cases, the solution of the game is defined by the stable steady point, or an equilibrium. However, our game has no stable steady point. Therefore, it is shown that the aid of financial policy is necessary for the game to have its solution. The aid is defined by controlling the distribution rate of GDP to the monetary sector. The financial policy is defined as the policy rule. This distribution rate has the rigorous restriction for the game to have its solution. It is shown that the solution of the game has the character of natural economy. The policy rule plays an important role to keep the balance of the economy and hence to prevent the economy from deviate from natural economy. In the final section, we investigate the actual transitions of distribution rate in USA, Euro area and Japan and analyze the fundamental cause of financial crisis.

Suggested Citation

  • Koji Akimoto, 2014. "A Fundamental Cause of Economic Crisis," Proceedings of International Academic Conferences 0702344, International Institute of Social and Economic Sciences.
  • Handle: RePEc:sek:iacpro:0702344
    as

    Download full text from publisher

    File URL: https://iises.net/proceedings/12th-international-academic-conference-prague/table-of-content/detail?cid=7&iid=3&rid=2344
    File Function: First version, 2014
    Download Restriction: no

    More about this item

    Keywords

    Balance of real economic and monetary sector; natural distribution rate to monetary sector; deviation from natural economy financial policy rule; differential game;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sek:iacpro:0702344. 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: (Klara Cermakova). General contact details of provider: https://iises.net/ .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.