Hicksian Instability in Asset Markets and Financial Fragility

Peter Gray
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Peter Gray: Rensselaer Polytechnic Institute

Eastern Economic Journal, 1992, vol. 18, issue 3, 249-258

Abstract: The phenomenon of financial crisis is not well based in theory. This paper offers a transposition of Hicksian (flow) instability into an asset market framework. Factors contributing to systemic vulnerability to crisis are the degree of financial leverage of the participants in the market (including the capital adequacy of institutions), the degree to which actors in the market overestimate the willingness and capability of the lender of last resort to function in that role, and the strength of the existing linkages among markets in the financial system.

Keywords: Financial; Crisis (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:18:y:1992:i:3:p:249-258

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