This book examines the role of uncertainty on financial decisions - and, consequently, on financial markets - in the buildup to and aftermath of the Great Recession. It tracks the significant growth and important structural changes in the financial sector during the past few decades, both of which made the economy more vulnerable to perceptions of risk in the markets. Halperin argues that conventional economic models have lost relevance by failing to take these developments into account appropriately, and also explains that because of financial globalization we can no longer understand what happens in the economies of major countries by relying on "closed-economy" thinking. The book concludes with a list of policy recommendations designed to increase the resilience of the financial markets to negative economic developments and to reduce incentives for risk taking, including a proposal to eliminate the double taxation of dividends.
Ricardo A. Halperin taught macroeconomics and monetary theory at the University of Buenos Aires, Argentina, and advised Argentina's Minister of Economy, Secretary to the Treasury, and National Development Bank before joining the World Bank, where he held various management positions. He is currently retired.
1. A Failure of ImaginationPart A2. The Great Recession of 2007-20083. Fingers in the DikePart B4. Financial Intermediation and the Economy5. The Evolution of Financial IntermediationPart C6. Economics' Quest for Relevance7. Theories of Business Fluctuations8. The Elusive Search for Economic Motives9. Risk, Uncertainty, and Macroeconomic TheoryPart D10. The Visible Hand11. Regulation in the Financial Sector12. Prudential RegulationPart E13. Challenges Ahead14. Economic Policy Implications15. Summing Up