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Hicksian Instability in Asset Markets and Financial Fragility

Author

Listed:
  • H. Peter Gray

    (Rensselaer Polytechnic Institute
    Rutgers University)

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.

Suggested Citation

  • H. Peter Gray, 1992. "Hicksian Instability in Asset Markets and Financial Fragility," Eastern Economic Journal, Eastern Economic Association, vol. 18(3), pages 249-258, Summer.
    • Handle: RePEc:eej:eeconj:v:18:y:1992:i:3:p:249-258
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume18/V18N3P249_258.pdf
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    References listed on IDEAS

    as
    1. Gray, Jean M. & Gray, H. Peter, 1981. "The multinational bank: A financial MNC?," Journal of Banking & Finance, Elsevier, vol. 5(1), pages 33-63, March.
    2. Eichengreen, Barry & Portes, Richard, 1986. "The Anatomy of Financial Crises," CEPR Discussion Papers 130, C.E.P.R. Discussion Papers.
    3. Mordecai Ezekiel, 1938. "The Cobweb Theorem," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 52(2), pages 255-280.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial Crisis;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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