An Historical Walk Through Recent Financial Crises

Abstract

This paper analyzes the causes and implications of recent financial crises. Financial crises in general lead to changes in both theory and practice of economics. The paper takes an historical overview. The global consensus of economic theory during the 20th century is discussed. The paper describes the Bretton Woods regime after World War II, details the era of adaptive expectations and motivates the emerging of the rational expectations school of thoughts. Various perspectives on the causes of the financial crisis are incorporated. The paper provides some policy suggestions and remarks on the consequences of ever-changing capital markets.

Keywords: Financial crises, The United States Financial Crisis Inquiry Commission, The 2010 Economic Report of the United States President, Keynsian Theory, Adaptive Expectations, Rational Expectations, Monetary and Fiscal Policies, Business Cycles, Regulations, General Agreement on Tariffs and Trade (GATT)

JEL Classification: B0, E0, E3, E4, E5, E6, F0, F3, F4, G0, G01, H3, H6, K2, O51, P1, R3