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Stefan Ederer (Project co-ordinator), Policy Options for Sustaining Long-term Growth in the Presence of Complex Financial Markets and a Financialised Economy

Current research studies (work in progress)
Large and complex financial markets have been an increasing source of concern in regard to sustainable long-term growth and financial stability. The aim of our research is to systematically explore this topic by constructing a novel macroeconomic model which incorporates the endogenous dynamics of the creation, valuation and distribution of financial assets and their repercussions on the real economy. Our model includes complex financial markets and a large shadow banking sector, which enables us to simultaneously address issues concerning economic growth, asset price inflation, pro-cyclical leverage effects, and financial fragility in the Euro area. These phenomena lead to business cycles induced by financial markets, which we label "Kindleberger cycles". We calibrate the model to recent economic developments in the Euro area and use it to evaluate policy options to foster sustainable long-term economic growth, accounting for the boundary problem in financial regulation.
Commissioned by: Vienna University of Economics and Business Administration
Study by: Austrian Institute of Economic Research – Vienna University of Economics and Business Administration
Research group:Macroeconomics and European Economic Policy