The banking crisis as dynamic stochastic general equilibrium

Minford, Anthony Patrick Leslie ORCID: https://orcid.org/0000-0003-2499-935X 2010. The banking crisis as dynamic stochastic general equilibrium. CESifo Economic Studies 56 (4) , pp. 554-574. 10.1093/cesifo/ifq016

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Abstract

Crises are triggered by the inherent uncertainty of the capitalist system. We represent this uncertainty in an open economy real business cycle model of the UK by including non-stationary productivity shocks. A random sequence of good or bad shocks will accumulate, producing euphorias and crises; banking crises will be superimposed when banks have been sucked in by a euphoria. Existing macro models can also help to understand the macro effects of a banking crisis and to calibrate the necessary policy responses, even if they cannot explain the crisis shock itself; we illustrate this from DSGE models of the EU and the US. In designing new regulative systems we need to avoid throwing the capitalist baby out with the risky bathwater.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Advanced Research Computing @ Cardiff (ARCCA) Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory H Social Sciences > HG Finance J Political Science > JA Political science (General) J Political Science > JF Political institutions (General) J Political Science > JK Political institutions (United States) J Political Science > JN Political institutions (Europe) K Law > K Law (General)
Publisher:	Oxford University Press
ISSN:	1610-241X
Last Modified:	19 Oct 2022 09:12
URI:	https://orca.cardiff.ac.uk/id/eprint/20261

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