{"id":112656,"date":"2024-01-22T17:40:51","date_gmt":"2024-01-22T16:40:51","guid":{"rendered":"https:\/\/www.wifo.ac.at\/publication\/112656\/"},"modified":"2024-11-07T04:06:28","modified_gmt":"2024-11-07T03:06:28","slug":"the-financial-crisis-as-an-overshooting-phenomenon","status":"publish","type":"publication","link":"https:\/\/www.wifo.ac.at\/en\/publication\/112656\/","title":{"rendered":"The Financial Crisis as an Overshooting Phenomenon"},"content":{"rendered":"","protected":false},"featured_media":0,"template":"","class_list":["post-112656","publication","type-publication","status-publish","hentry"],"acf":{"subtitle":"","text":"Inspired by Dornbusch's model of exchange rate overshooting we develop a theory of stock market behaviour. The idea is that stock market prices overshoot and undershoot their long-run equilibrium values which are determined by the development in the real economy. The overshooting is fuelled primarily by a loose monetary policy. The simple macro model consists of three markets \u2013 the money market, the stock market and the goods market \u2013 interacting with different speeds of adjustment. The goods market slowly adjusts relative to the money and the asset market. This model can explain some of the major features of the global financial crisis, having its origin in the loose monetary policy in the USA and spreading its recession-plagued effects all over to the world economy. The model focuses primarily on the monetary interpretation of the present crisis leaving aside the complex interactions of the real estate bubble in the USA, followed by the innovation of new financial instruments which were sold all over the world, hoping to disperse the inherent risks. Nor does this model deal with the institutional aspects of the financial crisis (the failed behaviour of banks, the banking crises, unregulated financial markets, etc.). These are questions of better international regulation of the financial industry touched upon by the G-20 summit in London.","onlinedate":"2009-04-27 02:00:00","lang":"English","publication_series":"","publication_date":"20090401","publication_date_year":"","publication_date_full":false,"publication_num_pages":"30","keywords":"[\"Business Cycles\",\"Financial Crisis\",\"Open Economy Macroeconomics\",\"Stock Markets\"]","jelcodes":"[]","related_publications":"[]","pdf":333363,"zip":null,"link":"","monthly_report":true,"monthly_report_main":false,"monthly_report_volume":"","monthly_report_pages":"","monthly_report_pages_sort":"0","issue":"336","journal":"WIFO Working Papers","publisher":"","invisible":false,"external":false,"embargo_date":null,"types":[44410],"research_groups":[3500],"collaboration":"","persons":[3917],"persons_data":"[{\"personId\":3917,\"personName\":\"Fritz Breuss\",\"organisationNames\":[]}]","clients":[],"subclients":[],"partners":[],"topics":[],"host_publication_title":"","host_publication_subtitle":"","place_of_publication":"","host_publication_editors":"[]","type_description":"","output_media":"","chapter":"","article_number":"","citations":"{\"apa\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_apa rendering_contributiontoperiodical rendering_apa rendering_contributiontoperiodical_apa\\\"><span>Breuss, F.<\\\/span> (2009). <span>The Financial Crisis as an Overshooting Phenomenon<\\\/span>. <span><em>WIFO Working Papers<\\\/em><\\\/span>, (336). <a onclick=\\\"window.open(this.href, '_blank','noopener,noreferrer'); return false;\\\" href=\\\"https:\\\/\\\/www.wifo.ac.at\\\/wwa\\\/pubid\\\/35621\\\" class=\\\"link\\\"><span>https:\\\/\\\/www.wifo.ac.at\\\/wwa\\\/pubid\\\/35621<\\\/span><\\\/a><\\\/div>\",\"vancouver\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_vancouver rendering_contributiontoperiodical rendering_vancouver rendering_contributiontoperiodical_vancouver\\\"><span>Breuss F<\\\/span>. <span class=\\\"title\\\"><span>The Financial Crisis as an Overshooting Phenomenon<\\\/span><\\\/span>. <span>WIFO Working Papers<\\\/span>. 2009 Apr;(336).<\\\/div>\",\"bibtex\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_bibtex rendering_contributiontoperiodical rendering_bibtex rendering_contributiontoperiodical_bibtex\\\"><div>@misc{bb642dd0b47e461fb3d9bff947587904,<\\\/div><div>  title    = \\\"The Financial Crisis as an Overshooting Phenomenon\\\",<\\\/div><div>  abstract = \\\"Inspired by Dornbusch's model of exchange rate overshooting we develop a theory of stock market behaviour. The idea is that stock market prices overshoot and undershoot their long-run equilibrium values which are determined by the development in the real economy. The overshooting is fuelled primarily by a loose monetary policy. The simple macro model consists of three markets \u2013 the money market, the stock market and the goods market \u2013 interacting with different speeds of adjustment. The goods market slowly adjusts relative to the money and the asset market. This model can explain some of the major features of the global financial crisis, having its origin in the loose monetary policy in the USA and spreading its recession-plagued effects all over to the world economy. The model focuses primarily on the monetary interpretation of the present crisis leaving aside the complex interactions of the real estate bubble in the USA, followed by the innovation of new financial instruments which were sold all over the world, hoping to disperse the inherent risks. Nor does this model deal with the institutional aspects of the financial crisis (the failed behaviour of banks, the banking crises, unregulated financial markets, etc.). These are questions of better international regulation of the financial industry touched upon by the G-20 summit in London.\\\",<\\\/div><div>  keywords = \\\"Business Cycles, Financial Crisis, Open Economy Macroeconomics, Stock Markets, Business Cycles, Financial Crisis, Open Economy Macroeconomics, Stock Markets\\\",<\\\/div><div>  author   = \\\"Fritz Breuss\\\",<\\\/div><div>  year     = \\\"2009\\\",<\\\/div><div>  month    = apr,<\\\/div><div>  language = \\\"English\\\",<\\\/div><div>  journal  = \\\"WIFO Working Papers\\\",<\\\/div><p>}<\\\/p><\\\/div>\",\"ris\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_ris rendering_contributiontoperiodical rendering_ris rendering_contributiontoperiodical_ris\\\"><p>TY  - GEN<\\\/p><p>T1  - The Financial Crisis as an Overshooting Phenomenon<\\\/p><p>AU  - Breuss, Fritz<\\\/p><p>PY  - 2009\\\/4<\\\/p><p>Y1  - 2009\\\/4<\\\/p><p>N2  - Inspired by Dornbusch's model of exchange rate overshooting we develop a theory of stock market behaviour. The idea is that stock market prices overshoot and undershoot their long-run equilibrium values which are determined by the development in the real economy. The overshooting is fuelled primarily by a loose monetary policy. The simple macro model consists of three markets \u2013 the money market, the stock market and the goods market \u2013 interacting with different speeds of adjustment. The goods market slowly adjusts relative to the money and the asset market. This model can explain some of the major features of the global financial crisis, having its origin in the loose monetary policy in the USA and spreading its recession-plagued effects all over to the world economy. The model focuses primarily on the monetary interpretation of the present crisis leaving aside the complex interactions of the real estate bubble in the USA, followed by the innovation of new financial instruments which were sold all over the world, hoping to disperse the inherent risks. Nor does this model deal with the institutional aspects of the financial crisis (the failed behaviour of banks, the banking crises, unregulated financial markets, etc.). These are questions of better international regulation of the financial industry touched upon by the G-20 summit in London.<\\\/p><p>AB  - Inspired by Dornbusch's model of exchange rate overshooting we develop a theory of stock market behaviour. The idea is that stock market prices overshoot and undershoot their long-run equilibrium values which are determined by the development in the real economy. The overshooting is fuelled primarily by a loose monetary policy. The simple macro model consists of three markets \u2013 the money market, the stock market and the goods market \u2013 interacting with different speeds of adjustment. The goods market slowly adjusts relative to the money and the asset market. This model can explain some of the major features of the global financial crisis, having its origin in the loose monetary policy in the USA and spreading its recession-plagued effects all over to the world economy. The model focuses primarily on the monetary interpretation of the present crisis leaving aside the complex interactions of the real estate bubble in the USA, followed by the innovation of new financial instruments which were sold all over the world, hoping to disperse the inherent risks. Nor does this model deal with the institutional aspects of the financial crisis (the failed behaviour of banks, the banking crises, unregulated financial markets, etc.). These are questions of better international regulation of the financial industry touched upon by the G-20 summit in London.<\\\/p><p>KW  - Business Cycles<\\\/p><p>KW  - Financial Crisis<\\\/p><p>KW  - Open Economy Macroeconomics<\\\/p><p>KW  - Stock Markets<\\\/p><p>KW  - Business Cycles<\\\/p><p>KW  - Financial Crisis<\\\/p><p>KW  - Open Economy Macroeconomics<\\\/p><p>KW  - Stock Markets<\\\/p><p>M3  - WIFO series<\\\/p><p>JO  - WIFO Working Papers<\\\/p><p>JF  - WIFO Working Papers<\\\/p><p>ER  - <\\\/p><\\\/div>\"}","scientific_assistance":"[]","scientific_review":"[]","version":"","release_date":null,"expiration_date":null,"surveyor":"","research_assistance":"","edv":"","additional_info_de":"","additional_info_en":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>The Financial Crisis as an Overshooting Phenomenon - WIFO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.wifo.ac.at\/en\/publication\/112656\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Financial Crisis as an Overshooting Phenomenon\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.wifo.ac.at\/en\/publication\/112656\/\" \/>\n<meta property=\"og:site_name\" content=\"WIFO\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/WIFOat\/\" \/>\n<meta property=\"article:modified_time\" content=\"2024-11-07T03:06:28+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.wifo.ac.at\/wp-content\/uploads\/2024\/05\/WIFO-Gebaeude-FotoAlexanderMueller-www.alexandermueller.at-IMG_6326-Bearbeitet-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1280\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@WIFOat\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.wifo.ac.at\\\/en\\\/publication\\\/112656\\\/\",\"url\":\"https:\\\/\\\/www.wifo.ac.at\\\/en\\\/publication\\\/112656\\\/\",\"name\":\"The Financial Crisis as an Overshooting Phenomenon - 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