{"id":115428,"date":"2024-01-22T19:24:34","date_gmt":"2024-01-22T18:24:34","guid":{"rendered":"https:\/\/www.wifo.ac.at\/publication\/115428\/"},"modified":"2025-10-22T21:48:52","modified_gmt":"2025-10-22T19:48:52","slug":"global-financial-crisis-as-a-phenomenon-of-stock-market-overshooting","status":"publish","type":"publication","link":"https:\/\/www.wifo.ac.at\/en\/publication\/115428\/","title":{"rendered":"Global Financial Crisis as a Phenomenon of Stock Market Overshooting"},"content":{"rendered":"","protected":false},"featured_media":0,"template":"","class_list":["post-115428","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 and its impact on the real economy. 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 triggered primarily by a loose monetary policy. With our model we explain the genesis of the global financial crisis 2008\u20132009 primarily as the result of a loose monetary policy in the USA. Following the overshooting and crash in the stock market the real economy dropped into a recession. After modelling the interaction of three markets with different speed of adjustment \u2013 money, stocks and goods \u2013 for a closed economy we expand it to an open economy and lastly study the spillovers of a financial market crisis between countries (from a large to a small country) by introducing the transmission channels of external trade or cross-border financial transactions. A long-lasting monetary easing as exhibiting by the Fed and the ECB since 2007 and 2008, respectively, could \u2013 according to our model \u2013 generate another boom-bust cycle.","onlinedate":"2011-02-01 01:00:00","lang":"English","publication_series":"","publication_date":"20110201","publication_date_year":"","publication_date_full":false,"publication_num_pages":"","keywords":"[\"Business cycles\",\"Financial crisis\",\"Open economy macroeconomics\",\"Stock markets\"]","jelcodes":"[]","related_publications":"[]","pdf":null,"zip":null,"link":"http:\/\/www.springer.com\/10663","monthly_report":false,"monthly_report_main":false,"monthly_report_volume":"38","monthly_report_pages":"131-152","monthly_report_pages_sort":"131","issue":"1","journal":"Empirica","publisher":"","invisible":false,"external":true,"embargo_date":null,"types":[83083],"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":"","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 v27.3 (Yoast SEO v27.3) - 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