FINANCIAL WORLD

Towards a New Paradigm: Stabilizing Financial Markets

By Moritz Schularick and Kaspar Zimmermann, University of Bonn

BY

FORUM NEW ECONOMY

PUBLISHED

1. NOVEMBER 2019
In their basic study for the Forum New Economy Schularick and Zimmerman show how the old paradigm based on the hypothesis of ever efficient financial markets failed. Traders in reality periodically misprice fundamental risks which leads to the conclusion that stronger buffers are needed to make the financial system resilient to asset price fluctuations.
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ABOUT FINANCIAL WORLD

KNOWLEDGE BASE

More than a decade after the financial crisis there still seems to be something seriously wrong with the financial system. Financial markets still tend to periodically misprice risk and contribute to boom and bust cycles. A better financial system needs to discourage short-termism and speculative activity, curtail systemic risk and distribute wealth more broadly.

ARTICLE OVERVIEW