Financial Assets, Debt and Liquidity Crises
A Keynesian Approach

This book shows how the Keynesian approach to business cycles can be used to explain and understand the current financial crisis.

Matthieu Charpe (Author), Carl Chiarella (Author), Peter Flaschel (Author), Willi Semmler (Author)

9781107546660, Cambridge University Press

Paperback / softback, published 6 August 2015

458 pages, 94 b/w illus. 46 tables
24.5 x 17.2 x 2.4 cm, 0.8 kg

The macroeconomic development of most major industrial economies is characterised by boom-bust cycles. Normally such boom-bust cycles are driven by specific sectors of the economy. In the financial meltdown of the years 2007–9 it was the credit sector and the real-estate sector that were the main driving forces. This book takes on the challenge of interpreting and modelling this meltdown. In doing so it revives the traditional Keynesian approach to the financial-real economy interaction and the business cycle, extending it in several important ways. In particular, it adopts the Keynesian view of a hierarchy of markets and introduces a detailed financial sector into the traditional Keynesian framework. The approach of the book goes beyond the currently dominant paradigm based on the representative agent, market clearing and rational economic agents. Instead it proposes an economy populated with heterogeneous, rationally bounded agents attempting to cope with disequilibria in various markets.

List of figures
List of tables
Notation
Preface
1. Financial crises and the macroeconomy
Part I. The Nonlinear Dynamics of Credit and Debt Default: 2. Currency crises, credit crunches and large output loss
3. Mortgage loans, debt default and the emergence of banking crises
4. Debt deflation and the descent into economic depression
Part II. Theoretical Foundations for Structural Macroeconometric Model Building: 5. Keynesian macroeconometric model building: a point of departure
6. Intensive form and steady state calculations
7. Partial feedback structures and stability issues
Part III. Debt Crises: Firms, Banks and the Housing Markets: 8. Debt deflation: from low- to high-order macrosystems
9. Debt default, bankruptcy of firms, and banks' performances
10. Japan's institutional configuration and its financial crisis
11. Housing investment cycles, workers' debt and debt default
Bibliography.

Subject Areas: Bankruptcy & insolvency [LNPC], Financial services industry [KNST], Economic & financial crises & disasters [KCX], Macroeconomics [KCB]