Autore: Sau, Lino
Titolo: Instability and crisis in financial complex systems
Periodico: Università degli studi di Torino. Dip. Di Economia e Statistica Cognetti de Martiis. CESMEP. Working paper series
Anno: 2010 - Volume: 1 - Fascicolo: 1 - Pagina iniziale: 1 - Pagina finale: 29

In this paper I try to contrast the Efficient Markets Hypothesis (EMH) with the Financial Instability Hypothesis (FIH) held by Hyman Minsky taking into account the dynamic complexity of financial markets and the role of fundamental uncertainty and organic interdependence. In my opinion this approach may provide indeed analytical tools to explain crisis through processes endogenous to contemporary economics. The relevance of complex dynamic has been particularly stressed recently by Barkley Rosser (2004; 2005); this author consider indeed complex dynamic a strong foundation for Keynesian models and results. Complex dynamics enter indeed into the analysis in at least two ways: it provides an independent source of fundamental uncertainty and this one, as discuss by Keynes himself (1936, 1937), can lead to speculative bubbles in assets markets and to over-reactions both in lender’s and borrower’s attitude toward risk. These aspects can lead to financial fragility and instability and follow a variety of complex dynamics. As I shall try to argue a financially complex system, according to the FIH, is indeed inherently flawed: in absence of adequate economic policy, booms and busts phenomena in financial markets fuelled by credit booms and busts, may generate endogenous instability and systemic crisis like the one occurred for the so-called “sub-prime crisis”




Testo completo: http://www.cesmep.unito.it/WP/2010/1_WP_Cesmep.pdf

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