Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87706
Authors: 
Spahn, Peter
Year of Publication: 
2013
Series/Report no.: 
FZID Discussion Paper 83-2013
Abstract: 
Economists in the public are accused of propagating highly professional, but unrealistic theories that mislead market agents and policy makers to place too much confidence in rational behaviour and market equilibrium. The paper analyses to what extent the US banking crisis and the euro crisis can be ascribed to fallacious assessments and recommendations on the part of economic theory. In the first case, myopic financial market theory and practice had neglected systemic repercussions of micro bank trading patterns. The euro crisis emerged from the neglect of undergraduate economic wisdom of necessary adjustment mechanisms in a currency union. Economists hopefully misinterpreted current account deficits as a sign of structural change.
Subjects: 
Efficient Market Hypothesis
rational behaviour
banking crisis
New Keynesian model
intertemporal optimisation
euro crisis
JEL: 
F33
G20
N10
N20
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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