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Roy E. Allen

This chapter provides case studies of the recent US and European financial crises, and shows that China is at risk of a turning point from boom to bust. Also, some new thinking is presented, which explains the continuing occurrence of large-scale financial crises. Key financial variables are shown to be driven more by psychological and social constructs than is commonly understood. Money and wealth can be created, transferred, and destroyed across the global economy independently of the rest of the ‘real’ economy. Also, expanding our understanding of recent crises can be assisted by evolutionary and complex systems approaches, especially ones that privilege the role of interactive knowledge and belief systems. A new political economy of financial crisis is advanced to organize issues and topics related to large-scale financial crises.
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Piero Ferri

This chapter introduces Harrod’s analysis in order to understand the origin of instability in a dynamic model. It deals with the relationships with the neoclassical growth models, where the role of demand is null and the instability process is a mathematical curiosum. It shows how instability arises in a demand-driven model and how it can be thwarted.
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Piero Ferri

This book studies the relationships between aggregate demand, inequality and instability. It extends the traditional approach by introducing wealth and inequality into a dynamic macroeconomic model. Furthermore, it examines the role that debt and financial instability can play in turbulent times such as the Great Recession and its aftermath. Unlike Piketty, the author analyses the relationships between instability and inequality, and the feedbacks from the latter to the former, in a system approach where real and monetary factors interact to generate complex patterns.
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Piero Ferri

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Roy E. Allen

This new edition of Financial Crises and Recession in the Global Economy explores the major financial instabilities and evolutionary trends in the global economy since the 1970s. A learned but accessible book, it is perfect for a broad audience of academics and practitioners but has also been used as a supplementary textbook for courses in international economics, international finance, money and banking, and macroeconomics.
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Roy E. Allen

Since the 1970s, the rapid expansion and globalization of financial markets shadows most other developments in international economics. This chapter documents and defines financial globalization and discusses what caused it: developments in information-processing technologies; government deregulation; and the more global nature of all economic activity. International interest rate and financial strategy ‘parities’ are presented as new, dominant, dynamic patterns in the global economy. Financial market globalization has been a driving force behind recent imbalances in trade and investment between countries. And, the self-adjustment mechanisms within the global economy have been irreversibly changed by financial globalization.
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Roy E. Allen

This chapter discusses financial trends and instabilities in the 1980s, including the 1982 global recession and 1982 world debt crisis, and the 1987 world stock market crash. An understanding of money supply and demand, monetary velocity, and related statistics is developed and used to discuss financial crises and recessions during the 1980s. More of the ‘money and credit pyramid’ was used to accommodate the fast growth of financial markets, and proportionally less was simultaneously available for non-financial or GDP purposes. This phenomenon shows up as a decline in the income velocity of money in the US, the UK, and elsewhere, in various case studies.
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Roy E. Allen

This chapter discusses financial trends and instabilities in the 1990s, including the early 1990s recessionary period in Europe and the US, Sweden’s crisis in 1991, Japan’s crisis after 1989, Mexico’s crisis in 1994–95, and Asia’s crisis in 1997. Common factors emerge to explain these crises, including deregulation and globalization of national markets, increased international transfers of money and credit, the subsequent adjustments in international trade, and various other boom–bust factors. Responses of central banks are evaluated.
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Roy E. Allen

This chapter presents a ‘human ecology economics (HEE)’ framework to guide research and policymaking on large-scale financial crisis and then uses the HEE framework to elaborate recent financial instabilities. It identifies the longer-term role of various kinds of ‘capital’ in the financial system, including how capital is important for sustainable growth and development. The long-term effects of financial globalization and related processes of capital accumulation are discussed. Through a process defined as ‘US money-mercantilism, ,the US dollar core of the global system is seen as a major ‘winner’ in the new structure of the global economy. Suggestions for policymakers as well as conclusions to the book are presented.
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Piero Ferri

This chapter discusses the role that inequality can have on aggregate demand in a static environment. The literature distinguishes between wage-led and profit-led models where the concept of inequality can be included. In the present model, wealth is also considered. Furthermore, the necessity of referring to a dynamic analysis where income distribution and inequality are endogenous variables is put forward.