Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111209
Authors: 
Falkinger, Josef
Year of Publication: 
2014
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 154
Abstract: 
This paper presents a general equilibrium model with technological uncertainty, financial markets and imperfect information. The future consists of uncertain environments that are more or less clearly distinguishable (measurable). This limits the possibilities of specialization and diversification. Households have no direct information about the productivity of risky technologies. They rely on the information conveyed by the set of financial products provided by the financial sector, the pay-off promises of the products and their prices. Unreliable information-processing by financial markets leads to deception of households. As a result, extending the space spanned by financial products is not unambiguously good. This suggests a policy rule which ties financial innovations to the experience base of the economy.
Subjects: 
Real and financial economics
incomplete knowledge
risk and uncertainty
financial crisis
size of financial sector
responsible finance
JEL: 
D53
D83
G01
G21
B41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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