New Thinking on the Financial Crisis
SMC Affiliated Work
School of Economics and Business Administration
Critical Perspectives on International Business
Emerald Group Publishing Limited
– The purpose of this paper is to expand understanding of the current global financial crisis in light of other large‐scale financial crises.
– The phenomenon of large‐scale financial crisis has not been modeled well by neo‐classical general equilibrium approaches; the paper explores whether evolutionary and complex systems approaches might be more useful. Previous empirical work and current data are coalesced to identify fundamental drivers of the boom and bust phases of the current crisis.
– Many features of financial crisis occur naturally in evolutionary and complex systems. The boom phase leading to this current crisis (early 1980s through 2006) and bust phase (2007‐) are associated with structural changes in institutions, technologies, monetary processes, i.e. changing “meso structures”. Increasingly, purely financial constructs and processes are dominant infrastructures within the global economy.
– Rigorous analytical predictions of financial crisis variables are at present not possible using evolutionary and complex systems approaches; however, such systems can be fruitfully studied through simulation methods and certain types of econometric modeling.
– Common patterns in large‐scale financial crises might be better anticipated and guarded against. Better money‐liquidity supply decisions on the part of official institutions might help prevent economy‐wide money‐liquidity crises from turning into systemic solvency crises.
– Scholars, policymakers, and practitioners might appreciate the more comprehensive evolutionary and complex systems framework and see that it suggests a new political economy of financial crisis. Despite a huge scholarly literature (organized recently as first‐ second‐ and third‐generation models of financial crises) and a flurry of topical essays in recent months, systemic understanding has been lacking.
Recession, Financial markets, Money, Credit
Business | Business Administration, Management, and Operations | Economics
Allen, R. (2009). New Thinking on the Financial Crisis. Critical Perspectives on International Business
Allen, Roy and Snyder, Donald. New Thinking on the Financial Crisis (2009). Critical Perspectives on International Business. Emerald Group Publishing Limited. 5 (1/2), 36-55. 10.1108/17422040910938677 [article]. https://digitalcommons.stmarys-ca.edu/school-economics-business-faculty-works/447