Imperfect Knowledge, Asset Price Swings and Structural Slumps: A Cointegrated VAR Analysis of Their Interdependence

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Abstract

This paper is an empirically based discussion of interactions between speculative behavior in the currency markets and aggregate fluctuations in the real economy. It builds on the recent theory of Imperfect Knowledge Economics in Frydman and Goldberg (2007) and combines this with the Structural Slumps theory in Phelps (1994). The paper argues that this is likely to imcrease our understanding of the long recurrent spells of high unemployment that continue to mar our economies.
Original languageEnglish
PublisherDepartment of Economics, University of Copenhagen
Number of pages22
Publication statusPublished - 2010

Keywords

  • Faculty of Social Sciences
  • financial markets
  • speculation
  • long swings
  • CVAR

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