Restoring the credibility of the legal and economic foundations of financial stability: The need for incorporation of economic theories?

Ojo, Marianne (2013): Restoring the credibility of the legal and economic foundations of financial stability: The need for incorporation of economic theories?

Abstract

To what extent can monetary and financial crises and cycles be explained through economic theories? This paper is aimed at highlighting why a reliance on economic theories may be necessary given certain flaws which have been revealed from the recent Financial Crisis. Namely, that economic and legal foundations of financial stability cannot always be considered to be credible.

Further, the paper aims to accentuate on why despite the valid argument (that a reference to economic theories may be required to explain causalities of financial and monetary crises), causalities could also be explained from other perspectives – even though these perspectives may sometimes, not be as accurate.

• Item Type: MPRA Paper
• Language: English
• Keywords: Theory of Economic Time (TET); Efficient Markets Hypothesis; financial stability; Currency Theory; Euro crisis; Austrian, Keynesian or Quantitativist-monetarist; Random Walk Theory
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; K - Law and Economics > K2 - Regulation and Business Law; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing

References

Basel Committe on Banking Supervision, „Principles For Sound Stress Testing Practices and Supervision http://www.bis.org/publ/bcbs155.pdf

Central Banking. Com, „Basel Committee Highlights Resource Challenges in Stress Testing“ http://www.centralbanking.com/central-banking/news/2167763/basel-committee-highlights-resource-challenges-stress-testing

C Bondones, „Currency Theory: The Crisis of Currency Financial Theories“ Chapter IV Currency Financial Institutions, http://www.carlosbondone.com/en/theory-of-economic-time/aplication/currency-theory.html (last accessed 11 May 2013)

E Financial News.Com, “Basel committee Slams Banks' Stress Testing” http://www.efinancialnews.com/story/2009-05-21/basel-committee-slams-banks-stress- testing-1

Ojo M, Recovering from the Global Financial Crisis: Achieving Financial Stability in Times of Uncertainty, Business Express Press, ISBN 978-1-60649-700-5, June 2013 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2245208