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Conventions and Financial Crises

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Abstract

This chapter presents this book’s conventions-based theory of financial instability. This framework synthesizes Post-Keynesian asset market theory, Keynesian epistemology, Charles Doran’s power cycle theory, and economic constructivism. Theoretical propositions include: (1) convention stability produces financial stability and enables fragility; (2) conventions blind market participants to looming instability; (3) shocks to convention-given expectations catalyze convention uncertainty; (4) convention uncertainty disrupts price discovery and triggers financial instability in fragile financial systems; and (5) elite responses to crises depend on their economic ideas used to diagnose crises and their intervention capacity. Empirical methods include counterfactual analysis, process-tracing, and quantitative techniques via a pathway case study of the global financial crisis with constitutive causal standards.

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    Neil Shenai

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Shenai, N. (2018). Conventions and Financial Crises. In: Social Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-91346-9_2

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  • DOI: https://doi.org/10.1007/978-3-319-91346-9_2

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