Managing Financial Instability in Capitalist Economies

Editor: Thomas Lux, University of Kiel, and Marco Raberto, Reykjavik University

Abstract:

We invite authors to submit papers for the Special Issue on “Managing Financial Instability in Capitalistic Economies”. This special issue follows the MAFIN09 workshop on the same topic held in Reykjavik, September 3rd-5th 2009, but is open also to contributions not presented in it. 

Special Issue Purpose

The special issue aims to present new modeling paradigms in financial economics able to understand the causes and the dynamics of financial and economic crises and to devise proper economic policies for recovering a capitalist economy from a deep recession due to a credit crunch or a collapse in assets values. 

Background

The current financial and banking crisis and the subsequent severe economic recession have dramatically demonstrated the importance of financial and credit markets in modern economies. According to mainstream approaches to economics, the structure of financial liabilities only has limited influence on aggregate economic activity. Capitalist economies are viewed as essentially stable and tending towards steady growth; and the investment-finance linkage is considered at the most as an amplifying mechanism of shocks exogenous to the economy. A different, unduly neglected strand of research emphasizes the role of the investment-finance link not just as a propagator of exogenous shocks but as the main source of financial instability and business cycles. In this tradition, endogenous boom-and-bust cycles might be due to excessive risk taking and overinvestment during good times. While this approach has long been dormant because of its abandonment of complete rationality of agents, the crisis has brought to the fore the importance of such explanations for ongoing events. On the theoretical side, recent developments in statistical equilibrium approaches to economics, alongside with the emergence of behavioral and agent-based models, have indicated the way to overcome the limitation of traditional equilibrium-based analytical models characterized by fully rational representative agents. 

Topics

The aim of the special issue is to solicit and publish papers that provide a new and fresh perspective in financial and economic modelling. We therefore encourage submissions on topics of relevance for this special issue from following areas:

  • Agent-based computational economics
  • Behavioural finance and economics
  • Economics of heterogeneous and interacting agents
  • Evolutionary economics
  • Financial Keynesianism and financial fragility
  • Financial engineering and regulation
  • Econophysics
  • Management of endogenous and systemic risk
  • Non-linear financial econometrics
  • Statistical equilibrium in economics  


Articles

2010-31
JournalPaper
Steve Keen
Solving the Paradox of Monetary Profits
October 28, 2010 | downloads: 7011 | JEL: E12, E17, E20, E51 | 7 comments | 12 citations (RePEc)
2010-26
JournalPaper
Silvano Cincotti, Marco Raberto, and Andrea Teglio
Credit Money and Macroeconomic Instability in the Agent-based Model and Simulator Eurace
September 24, 2010 | downloads: 3132 | JEL: E2, E32, E42 | 32 citations (RePEc)
2010-23
JournalPaper
Claude Hillinger
The Crisis and Beyond: Thinking Outside the Box
August 05, 2010 | downloads: 5107 | JEL: E31, E42, E58 | 2 comments | 2 citations (RePEc)
2010-21
JournalPaper
Toichiro Asada, Carl Chiarella, Peter Flaschel, Tarik Mouakil, Christian R. Proaño, and Willi Semmler
Stabilizing an Unstable Economy: On the Choice of Proper Policy Measures
July 16, 2010 | downloads: 3519 | JEL: E12, E24, E31, E52 | 6 citations (RePEc)
2010-20
JournalPaper
Fabio Caccioli and Matteo Marsili
Information Efficiency and Financial Stability
July 14, 2010 | downloads: 3496 | JEL: G0, G14
2010-8
JournalPaper
Markus Demary
Transaction Taxes and Traders with Heterogeneous Investment Horizons in an Agent-Based Financial Market Model
February 23, 2010 | downloads: 2194 | JEL: G15, D84, C15, G18 | 2 citations (RePEc)
2010-7
JournalPaper
Oliver Hermsen, Björn-Christopher Witte, and Frank Westerhoff
Disclosure Requirements, the Release of New Information and Market Efficiency: New Insights from Agent-based Models
February 19, 2010 | downloads: 1740 | JEL: G14, G18
2009-40
JournalPaper
David Tuckett
Addressing the Psychology of Financial Markets
November 20, 2009 | downloads: 3855 | JEL: G28, G18 | 1 comment | 3 citations (RePEc)

Discussion Papers

2009-52
DiscussionPaper
Charlotte Bruun and Carsten Heyn-Johnsen
The Paradox of Monetary Profits: An Obstacle to Understanding Financial and Economic Crisis?
December 03, 2009 | downloads: 1618 | JEL: E01, E11, E12, E25, E44 | discussible | 3 comments | 5 citations (RePEc)
2009-48
DiscussionPaper
Markus Pasche
Fundamental Uncertainty, Portfolio Choice, and Liquidity Preference Theory
November 11, 2009 | downloads: 1520 | JEL: B31, D81, E41, G11 | discussible | 6 comments