Chari, VV;
Kehoe, PJ;
(2004)
Financial crises as herds: overturning the critiques.
Journal of Economic Theory
, 119
(1)
pp. 128-150.
10.1016/S0022-0531(03)00225-4.
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Abstract
Financial crises are widely argued to be due to herd behavior. Yet recently developed models of herd behavior have been subjected to two critiques which seem to make them inapplicable to financial crises. Herds disappear from these models if two of their unappealing assumptions are modified: if their zero-one investment decisions are made continuous and if their investors are allowed to trade assets with market-determined prices. However, both critiques are overturned—herds reappear in these models—once another of their unappealing assumptions is modified: if, instead of moving in a prespecified order, investors can move whenever they choose.
| Type: | Article |
|---|---|
| Title: | Financial crises as herds: overturning the critiques |
| Location: | Venice Int Univ, Venice, ITALY |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/S0022-0531(03)00225-4 |
| Publisher version: | https://doi.org/10.1016/S0022-0531(03)00225-4 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Information cascades,Capital flows,Financial collapse |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10058356 |
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