Disinformation and “Bad” Financial Speculations: A Mechanism behind Financial Crises

Taiji Harashima

MPRA Paper from University Library of Munich, Germany

Abstract: Some financial speculations are similar to gambling or Ponzi schemes because they are undertaken to extract other people’s economic resources. In this sense, there will be “good” and “bad” financial speculations. In this paper, I construct static and dynamic models of bad speculations and show that an important determinant of the amount of bad speculation is the economic cost (inefficiency) generated, particularly by disinformation that is disseminated for the speculation. The economic cost and amount of bad speculation are influenced by the ability and effort of regulatory authorities, and if that ability largely deteriorates, the amount of bad speculation will greatly increase and a financial crisis will occur. Hence, people must look for signs of deterioration of the ability of the regulatory authority to prevent financial crises.

Keywords: Disinformation; Financial crisis; Financial regulation; Inefficiency; Speculation (search for similar items in EconPapers)
JEL-codes: D53 D84 G01 G14 G18 (search for similar items in EconPapers)
Date: 2025-06-01
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:124877

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