Income from Speculative Financial Transactions will always Lead to Macro-Economic Instability

Tobias Schädler and Michael Grabinski

International Journal of Finance, Insurance and Risk Management, 2015, vol. 5, issue 3, 922

Abstract: Starting with a macro-economic model based upon the NAIRU (the nonaccelerating inflation rate of unemployment), we show that, in a world with no (speculative) financial transactions, the macro- economy shows a stable equilibrium state. Including income from (speculative) financial transactions will lead to instability if the amount is sufficiently large. Considering the present amount of financial transactions, stability is impossible. Therefore, further financial crashes are not only likely but inevitable.

Keywords: system dynamics; instability; speculative financial transactions; conserved value; chaos. (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ers:ijfirm:v:5:y:2015:i:3:p:922

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