Causes of the financial crisis: Risk misperception, policy mistakes, and banks' bounded rationality

Tobias F. Rötheli

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2010, vol. 39, issue 2, 119-126

Abstract: This article describes important determinants of the current financial crisis. In particular, the text focuses on the bounded rationality of banks which contributes to the credit cycle. The credit cycle is the mechanism that links the present financial crisis with earlier crisis. Shortcomings on the side of monetary policy, rating agencies, and bank regulation are also discussed. We propose measures to strengthen the stabilizing effect of market forces, banks' risk management, as well as possible changes to regulation and monetary policy.

Keywords: Financial; crisis; Bounded; rationality (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:39:y:2010:i:2:p:119-126

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