Hardback
Stock Markets, Speculative Bubbles and Economic Growth
New Dimensions in the Co-evolution of Real and Financial Markets
9781840640717 Edward Elgar Publishing
This book sheds new light on the role of speculative bubbles in the stock market and argues that, provided they are sustainable, bubbles may in fact have a positive effect on the market.
More Information
Critical Acclaim
Contents
More Information
This book sheds new light on the role of speculative bubbles in the stock market and argues that, provided they are sustainable, bubbles may in fact have a positive effect on the market.
In many developed countries, speculative bubbles in stock markets seem to have emerged as a persistent phenomenon. This book offers new perspectives on the role bubbles play in recent economic development. The author refutes the traditional argument that speculative bubbles necessarily increase instability or develop at the expense of real activities. He argues that, when profitable investment projects are scarce, bubbles on the stock market may provide additional investment opportunities with the potential to increase aggregate profits and to improve economic welfare. However, he allows that this potentially positive effect can only occur if bubbles are sustainable and do not burst. Highly sophisticated financial systems are needed in order to allow for positive effects to develop or, as recent experience in Asia has shown, the destabilizing effects will outweigh the potential benefits.
The book takes a groundbreaking view on speculative bubbles and will be invaluable to academics and practitioners with an interest in financial economics.
In many developed countries, speculative bubbles in stock markets seem to have emerged as a persistent phenomenon. This book offers new perspectives on the role bubbles play in recent economic development. The author refutes the traditional argument that speculative bubbles necessarily increase instability or develop at the expense of real activities. He argues that, when profitable investment projects are scarce, bubbles on the stock market may provide additional investment opportunities with the potential to increase aggregate profits and to improve economic welfare. However, he allows that this potentially positive effect can only occur if bubbles are sustainable and do not burst. Highly sophisticated financial systems are needed in order to allow for positive effects to develop or, as recent experience in Asia has shown, the destabilizing effects will outweigh the potential benefits.
The book takes a groundbreaking view on speculative bubbles and will be invaluable to academics and practitioners with an interest in financial economics.
Critical Acclaim
‘. . . Binswanger does a superb job in explaining the relationship between the financial sector and the real economy. The book is excellent reading for advanced courses and researchers in financial and monetary macroeconomics.’
– E. Ahmed, Journal of Economics / Zeitschrift für Nationalökonomie
‘The book is impressive by its broad sweep through a large area of the financial economics literature, and the fact that a coherent and extensive model is developed and some of its implications are tested on US data. . . . the book is very worthwhile in that it successfully reviews and integrates a broad swathe of the finance literature, builds a coherent set of models and stories to support it and applies some of the more recent techniques from time-series econometrics to test the model’s implications. . . . I would recommend it to readers seeking an accessible review yet particular interpretation of this area of the literature and to students looking for a contemporary example of the process of modelling and related empirics.’
– D.E. Allen, Economic Record
‘This book integrates economic theory and financial markets, with extensive empirical verification that provides much food for thought. . . . gives a more reasoned economic approach to current markets than can be found in the more popular texts. . .’
– Edmund A. Mennis, Business Economics
‘A well-crafted book combining strong theoretical analysis with empirical verification, in an attempt to shed light on an important new economic phenomenon.’
– Paul de Grauwe, University of Leuven, Belgium
‘An interesting and challenging contribution that contrasts the existing literature on the real foundations of financial markets in a refreshing way.’
– Heinz Zimmermann, University of St Gallen, Switzerland
– E. Ahmed, Journal of Economics / Zeitschrift für Nationalökonomie
‘The book is impressive by its broad sweep through a large area of the financial economics literature, and the fact that a coherent and extensive model is developed and some of its implications are tested on US data. . . . the book is very worthwhile in that it successfully reviews and integrates a broad swathe of the finance literature, builds a coherent set of models and stories to support it and applies some of the more recent techniques from time-series econometrics to test the model’s implications. . . . I would recommend it to readers seeking an accessible review yet particular interpretation of this area of the literature and to students looking for a contemporary example of the process of modelling and related empirics.’
– D.E. Allen, Economic Record
‘This book integrates economic theory and financial markets, with extensive empirical verification that provides much food for thought. . . . gives a more reasoned economic approach to current markets than can be found in the more popular texts. . .’
– Edmund A. Mennis, Business Economics
‘A well-crafted book combining strong theoretical analysis with empirical verification, in an attempt to shed light on an important new economic phenomenon.’
– Paul de Grauwe, University of Leuven, Belgium
‘An interesting and challenging contribution that contrasts the existing literature on the real foundations of financial markets in a refreshing way.’
– Heinz Zimmermann, University of St Gallen, Switzerland
Contents
Contents: Preface Introduction Part I: Important Aspects of Money and Finance in Modern Economies 1. Finance and the Real Economy – The Variety of Keynesian and Non-Keynesian Perspectives in Recent Research 2. Endogenous Money Creation and its Economic Implications 3. The Finance Process on a Macroeconomic Level from a Flow Perspective: A New Interpretation of Hoarding Part II: The Stock Market and Speculative Bubbles: Theoretical Background 4. The Role of Speculation in Economics 5. Do Bubbles Enhance Dynamic Efficiency? 6. Explaining Persistent Deviations from Fundamental Values on the Stock Market: Dynamic Extensions of the Noise Trader Model Part III: The Stock Market and Speculative Bubbles: Empirical Evidence 7. The 1980s Merger Wave, Speculative Bubbles, and the Shift to Debt: Leveraged Restructuring Transactions as Stock Price Boosters 8. Investment Activity, Profits and the Stock Market in the US Economy: Some Lessons from the Flow of Funds Data 9. Stock Returns and Real Activity: Is there Still a Connection? Part IV: Conclusion 10. Towards a Sustainable Bubble Economy? References Index
