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“No One Saw This Coming”: Understanding Financial Crisis Through Accounting Models

Bezemer, Dirk J (2009): “No One Saw This Coming”: Understanding Financial Crisis Through Accounting Models.

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Abstract

This paper presents evidence that accounting (or flow-of-fund) macroeconomic models helped anticipate the credit crisis and economic recession. Equilibrium models ubiquitous in mainstream policy and research did not. This study identifies core differences, traces their intellectual pedigrees, and includes case studies of both types of models. It so provides constructive recommendations on revising methods of financial stability assessment. Overall, the paper is a plea for research into the link between accounting concepts and practices and macro economic outcomes.

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