MAFIN 09

First International Workshop on

Managing financial instability in capitalistic economies

Reykjavik, Iceland

September 3rd- 5th, 2009





Background

The financial and credit sectors have a great importance in our modern service-oriented economies. as the present credit crunch and financial market crash and the subsequent severe economic recession have pointed out. According to present mainstream approaches to economics, the financial and liability structure of the economy may influence aggregate economic activity and amplify business cycles. However, capitalistic economies are viewed as essentially stable and tending towards steady growth; and the investment-finance linkage is considered as an amplifying mechanism of shocks exogenous to the economy. A complementary strand of research emphasizes the role of the investment-finance link not just as a propagator of exogenous shocks but as the main source of financial instability and business cycles, i.e., during good times economic agents take excessive risks and lend and borrow too much, generating endogenous ruinous boom-and-bust cycles. Besides, recent developments in statistical equilibrium approaches to economics, alongside with the emergence of behavioural and agent-based models, have indicated the way to overcome the limitation of traditional equilibrium-based analytical models characterized by fully rational representative agents.


Aims and scope

The purpose of the workshop is twofold: to discuss new modelling paradigms in financial economics and to design new public intervention policies aimed to recover a capitalist economy from a deep recession caused by a credit crunch or a collapse in assets values. The Icelandic economy will be discussed as a case study.

Topics include, but are not limited to, the following:

· Agent-based computational economics

· Behavioural finance and economics

· Economics of heterogeneous and interacting agents

· Evolutionary economics

· Financial Keynesianism and financial fragility

· Financial engineering and regulation

· Econophysics

· Endogenous and systemic risk management

· Financial econometrics

· Statistical equilibrium in economics

A final roundtable is foreseen to discuss new possible foundations to the science of economics. A related document, called Reykjavik manifesto, will be released.