The Failure of Financial Macroeconomics and What to Do About it

Jean-Bernard Chatelain and Kirsten Ralf

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: The bargaining power of international banks is currently still very high as compared to what it was at the time of the Bretton Woods conference. As a consequence, systemic financial crises are likely to remain recurrent phenomena with large effects on macroeconomic aggregates. Mainstream macroeconomic models dealing with financial frictions failed to explain at least eight stylized facts of the ongoing crisis. We therefore suggest two complementary assumptions : (I) A systemic bankruptcy risk stable equilibrium may be feasible, besides another stable equilibrium related to a stability corridor, (II) inefficient financial markets rarely ensure that the price of an asset is equal to its "fundamental long term value". Both assumptions are compatible with a structural research programme taking into account the Lucas' critique (1976) but may start a creative destruction process of the Lucas' view of business cycles theory.

Keywords: general equilibrium models; Asset prices; liquidity trap; monetary policy; financial stability; business cycles; economic growth; dynamic stochastic; Prix d'actifs; trappe à liquidité; politique monétaire; stabilité financière; cycles économiques; croissance économique; modèles d'équilibre général dynamique stochastique (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-cba, nep-hpe, nep-mac and nep-mon
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00706777v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published in 2012

Downloads: (external link)
https://shs.hal.science/halshs-00706777v1/document (application/pdf)

Related works:
Journal Article: THE FAILURE OF FINANCIAL MACROECONOMICS AND WHAT TO DO ABOUT IT (2012)
Working Paper: The Failure of Financial Macroeconomics and What to Do about It (2012)
Working Paper: The Failure of Financial Macroeconomics and What to Do about It (2012)
Working Paper: The Failure of Financial Macroeconomics and What to Do About it (2012)
Working Paper: The Failure of Financial Macroeconomics and What to Do about It (2012)
Working Paper: The failure of Financial Macroeconomics and What to Do About It (2012)
Working Paper: The failure of financial macroeconomics and what to do about it (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00706777

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().