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How to predict and avert economic crisis

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  • Yong Tao

Abstract

Our study shows that many firms would accumulate at zero output level (namely, Bankruptcy status) if a perfectly competitive market reaches full employment (namely, those people who should obtain employment have obtained employment). As a result, appearance of economic crisis is determined by two points; that is, (a). Stock market approaches perfect competition; (b). Society reaches full employment. The empirical research of these two points would lead to early warning of economic crisis. Moreover, it is a surprise that the state of economic crisis would be a feasible equilibrium within the framework of the Arrow-Debreu model. That means that we can not understand the origin of economic crisis within the framework of modern economics, for example, the general equilibrium theory.

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  • Yong Tao, 2010. "How to predict and avert economic crisis," Papers 1010.5154, arXiv.org, revised Oct 2010.
    • Handle: RePEc:arx:papers:1010.5154
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    Cited by:

    1. Noel D'Cruz & Davide Crippa, 2012. "Stress Testing," Global Credit Review (GCR), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 39-52.

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