Finance Theory

The Institute for New Economic Thinking takes a broad view of economic research and supports it in many ways: through its main grant program, through working groups it organizes, and via conferences, panels, and other smaller gatherings of scholars across the globe.

Institute scholars normally publish their work in journals and books. While many – but far from all – of this work appears in working papers sponsored by the Institute and other leading research forums, the Institute also attempts to make its research results accessible to a wider public on its website. Below is a sampling of interviews featuring Institute scholars explaining the significance of their research in non-technical terms.

Marcello de Cecco: Two Hundred Years of Politics and High Finance

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The Gold Standard Before World War I
The International Monetary System During and After the First World War
The Great Depression and the International Monetary System
Bretton Woods and After: The Breakup of the Post World War II Monetary Order

Institutional Investors and the Offshore Hedge Fund Industry: Investigating Patterns of Linkage, Organization, and Governance

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This study combines the expertise of social anthropology, social network analysis, portfolio theory, and computational social science with the treasure-trove of a wholly unique database on hedge funds compiled by the Foundation for Fund Governance to examine the organization and governance of the offshore hedge fund industry.

Despite the substantial exposure of pension funds (including those of near-retirement or retired baby boomers), endowments, charities, and other institutional investors to hedge funds, little research has been done from this perspective on the market and other risks that surround the industry. Yet the implications for financial stability are considerable.

Safe Assets and the Evolution of Financial Information

Assets that are perceived as “safe” play a vital role in financial markets – serving, in particular, as high-quality collateral for transactions in repo and OTC derivative markets.  The global financial crisis and the problems in Europe have raised concerns that ongoing imbalances in the demand and supply of safe assets could have unhappy consequences for global financial stability and macroeconomic prospects.

Steve Keen: A Computer Simulation of Monetary Dynamics

The financial crisis that ran from 2007 to 2009 has been called a "Minsky Moment," meaning it offered a much-needed reminder to all economists of Hyman Minsky's neglected dictum that "capitalism is essentially a financial system." 
But even with this reminder, it is hard to know what to do next, since it is difficult to express Minsky's vision using the standard equilibrium methods of economics. Arguably that is one reason that Minsky has remained a minority taste in economics.  

Let Them Eat Credit: Has Financial Capitalism Failed the World?

Did the financial crisis of 2008 represent a failure of the capitalist system?

That crucial question was in the air when Institute for New Economic Thinking Senior Fellow Lord Adair Turner spoke in May at a special Head to Head debate hosted by Al Jazeera at England’s legendary Oxford Union. Read more

Dirk Bezemer - Debt: The Good, the Bad, and the Ugly

The last five years after the financial crisis have made clear that the workings of money, credit, and debt have profound consequences for the functioning of our economic system. But for many, the fundamental principles that make money work remain opaque.

Is it possible to create an economic system that does not produce bubbles and crises? And is it possible to solve our current debt crisis? Read more

Grantee Steve Keen at INET Hong Kong

INET Grantee Steve Keen speaks at INET's "Changing of the Guard?" conference in Hong Kong about his work on modeling disequilibrium. 

What Financial Regulators Can Learn from Network Theory

When regulators seek to identify systemically important financial institutions (SIFIs), they tend to focus on an institution’s size and connectedness. But this approach mises an important dimension of systemic risk, according to Imre Kondor, Stefano Battiston, Giorgio Fagiolo, and Alan Kirman. Read more

What is Shadow Banking? ft. INET's Perry Mehrling

Defining shadow banking is still a nightmare. Read more

Contagion of Sentiment, Investor Trading Activities, and Financial Crises

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We study the pricing and liquidity implications of sentiment and disagreement as origins of radical uncertainty in financial markets. We address this question in two ways. First, we propose a unified theoretical framework to explore how sentiment and disagreement affect the trading behaviors of market participants and hence asset prices and liquidity. Second, we use various data sources to investigate the model-generated empirical predictions on how disagreement-sentiment dynamics can explain certain patterns in stock return predictability and liquidity in the cross section and in the time series.