2018_11_22_ECO_crisis

"The bursting of the financial bubble could have been predicted with historical data , but the expectations of economic agents failed to detect it in advance and act accordingly". This was stated today at the University of Navarra by the Russian-American economist and Full Professor of department of Economics at Harvard University, Andrei Shleifer. Shleifer is the most cited economist in the world according to the Research Papers in Economics (RePEc) ranking.  

The expert, who gave a lecture at lecture at the School Economics and Business Administration under degree scroll "Instability in expectations", defended that the origin of the 2008 crisis is closely linked to the change in "expectations" of investors. In his opinion, investors mistakenly came to believe that real estate prices would rise indefinitely. According to Shleifer, the 2008 crisis had predictable elements, but "the combination of excessive optimism and substantial financial leverage ended up forming an explosive cocktail that was uncovered with the collapse of Lehman Brothers".

Models to predict a new crisis

On the other hand, regarding the possibility of a new economic crisis, he assured that it will be very difficult to foresee it. In this sense, he assured that banks are better capitalized to resist an eventual crisis and that it is important to maintain appropriate regulation to avoid excessive leverage and risks in the sector.

Regarding the work of economists modeling, Shleifer said he was "pleasantly surprised" by the willingness of macroeconomists to change expectations models. However, he acknowledges that "the application of the latter at the institutional level still seems a long way off".

Economist Andrei Shleifer is an expert in the areas of comparative corporate governance, law and finance, behavioral finance, as well as Economics institutional. He has published six books, as well as more than a hundred articles, and in 1999 he won the John Bates Clark Medal for his work in these fields.