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- Title
The financial accelerator effect: concept and challenges.
- Authors
ĆORIĆ, BRUNO
- Abstract
This review concentrates on the role of information asymmetry in financial markets in the amplifi cation and propagation of short-run output fl uctuations. We fi nd that the fi nancial accelerator effect, as it is known, provides a consistent, fi rst principle based, theoretical framework for the analysis of the relationship between financial markets and short-run output fl uctuations. It also provides a plausible explanation of the proximate causes of the recent crisis, and fi rst principle-based theoretical background for the credit policy measures taken during this crisis by many central banks and fiscal authorities. Despite the theoretical plausibility, the empirical evidence about the economic importance of the fi nancial accelerator effect is still relatively weak. We also suggest two new aspects to expand existing concept of the fi nancial accelerator effect, which call for further research.
- Subjects
INFORMATION asymmetry; FINANCIAL markets; PRODUCTION (Economic theory); CRISES; CREDIT control; BUSINESS cycles
- Publication
Financial Theory & Practice, 2011, Vol 35, Issue 2, p171
- ISSN
1846-887X
- Publication type
Article