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Modern Financial Macroeconomics: Panics, Crashes, and Crises 1st Edition

3.5 out of 5 stars 2 customer reviews
ISBN-13: 978-1405161817
ISBN-10: 1405161817
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Product Details

  • Paperback: 274 pages
  • Publisher: Wiley-Blackwell; 1 edition (April 2008)
  • Language: English
  • ISBN-10: 1405161817
  • ISBN-13: 978-1405161817
  • Product Dimensions: 6 x 0.7 x 9.1 inches
  • Shipping Weight: 1.1 pounds (View shipping rates and policies)
  • Average Customer Review: 3.5 out of 5 stars  See all reviews (2 customer reviews)
  • Amazon Best Sellers Rank: #1,289,264 in Books (See Top 100 in Books)

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Format: Hardcover Verified Purchase
Modern Financial Macroeconomics was a well timed discussion of the economics of panics crashes and crises. The book is split into 4 major parts- 1. Introduction to Finance and Macroeconomics 2. Macroeconomic Theory and the Role of Finance 3. Financial Volatility and Economic (In)Stability 4. International Finance and Financial Crises. The author does not assume much prior knowledge and introduces the reader to the core theory behind much of modern macroeconomics and aspects of finance and their interplay. I'll give a brief overview of the subject material.

The book starts in part 1 with an introduction to finance and its role in economics. The author introduces the uses of money and its role in finance. The author also discusses the evidence for the importance of having efficient financial markets in achieving economic growth, and the constraints on growth in the absence of a working financial system. The author also walks the reader through the history of central banking, the growth in international capital flows and the globalization of finance through the 90s.

Part 2 is the core of the book and walks the reader through theories of macroeconomics. He works on a historical evolution basis and introduces ideas chronologically discussion Keynsian theories, debt deflation and monetarist theories and includes a discussion of Minsky. This is all done in a non-technical way through general description. The book then introduces the modern ideas of financial macroeconomics with a discussion of macroeconomic theories with a financial system embedded. In particular Bernanke's financial accelerator model and Stiglitz's credit rationing theories.
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Format: Hardcover Verified Purchase
In one sense, the timing of "Modern Financial Macroeconomics" couldn't be better. Its central argument is that failures in financial markets -- such as overleveraging and herd behavior -- amplify and spread shocks to the real economy. This risk is especially great in emerging markets where money is "hot" and institutions weak. Given the global implosion of the last two years, it's hard to imagine a timelier book. It fleshes out economic theory with case studies of episodes like the Great Depression and the Asian Financial Crisis. It gives "heretics" like Minsky a fair hearing. It's a real breath of fresh air.

But in another sense, the timing of "Modern Financial Economics" couldn't be worse. The book was sent to the publisher immediately prior to the self-inflicted immolation of the U.S. financial system in 2008. As a result, this perfect thesis-vindicating case study doesn't even appear in the book (apart from a short discussion of Northern Rock). Even worse, there are too many smug statements like this (p. 214): "[After 9/11] the banking and financial system remained overall sound. The reliance on equity and not just bank borrowing, the preponderance of long-term debt...the existence of well-diversified portfolios, a proactive lender of last resort, and regulations restricting moral hazard and risky lending and borrowing...each played a role in creating the remarkably resilient financial system that the U.S. and many other developed countries enjoy today." This was written in 2007 or early 2008. Gag.

To be fair, the author does "get it." He knows that economics is about real-world markets, not about supply and demand curves intersecting on a blackboard.
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