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Predictability of financial crises: Lessons from Sweden for other countries
Linnaeus University, Faculty of Business, Economics and Design, Linnaeus School of Business and Economics.
2012 (English)In: Business Economics, ISSN 0007-666X, Vol. 47, no 4, 262-272 p.Article in journal (Refereed) Published
Abstract [en]

The predictability of financial crises is widely regarded as low. However, skills linked to market psychology (behavioral finance) and the understanding of history and macrofinancial aggregates have been insufficiently integrated in the forecasting and risk management of financial institutions. Traditional financial modeling can no longer be applied as nicely as in the past. In Sweden, the financial crises of the early 1990s and in the latter part of the past decade were caused by overconfidence, control illusion, and herd mentality - but also by shortcomings in management and corporate governance. There is no evidence that these two serious Swedish banking crises were not foreseeable. The general question is when and under which circumstances financial decision-makers and authorities should listen to the usual minority of warning voices. One conclusion is that economists should be more in house-oriented, and top managers should heed their professional opinions. Conclusions from this paper can also be drawn for China, India, and other emerging markets both when it comes to financial deregulation policy and government debt risks in deregulated financial markets. © National Association for Business Economics.

Place, publisher, year, edition, pages
2012. Vol. 47, no 4, 262-272 p.
Keyword [en]
behavioral finance, financial crisis, forecasting, Sweden
National Category
Economics and Business
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-22937DOI: 10.1057/be.2012.28ISBN: 0007666X (ISSN) (print)OAI: oai:DiVA.org:lnu-22937DiVA: diva2:578436
Available from: 2012-12-18 Created: 2012-12-14 Last updated: 2013-01-29Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf