Binding: Hardcover
Description: How financial crises are inherent features of macroeconomic dynamics There are no bigger disruptions in the functioning of economies than financial crises. Yet prior to the crash of 2007 2008, macroeconomics incorporated financial crises simply as bad shocks like earthquakes failing to consider them as an intrinsic phenomenon of the evolution of macroeconomic variables such as credit investment and productivity. Macroeconomics and Financial Crises rethinks how technological change credit booms and endogenous information production combine to generate financial crises as inherent and recurrent reactions to macroeconomic dynamics. Gary Gorton and Guillermo Ordo ez identify short - term debt collateral and information as common elements that are present in all financial crises. Short - term debt is a critical element for storing value over short periods without fear of loss but there needs to be collateral backing the debt. Critically the collateral should be such that no agent wants to produce information about its quality. The debt backed by such collateral is information - insensitive. Gorton and Ordo ez argue that during a credit boom as more and more firms get loans the economy reaches a tipping point where information production becomes too tempting disrupting short - term debt and cutting most firms out of the credit market. Showing how a financial crisis is an information event triggered by the dynamics of macroeconomic variables Macroeconomics and Financial Crises provides new perspectives on the intricate relations between macroeconomics and financial crises.
Title: Macroeconomics And Financial Crises Bound Together By Information Dynamics
Author(s): Ordonez Guillermo L.
Publisher: Princeton University Press
Barcode: 9780691227016
Pages: 208 Pages, 35 B/W Illus. 26 Tables.
Publication Date: 7/11/2023
Category: Finance