Enterprise Hall, 318
August 02, 2007, 08:00 PM to 07:00 PM
The last decade's financial crises resulted in breakdown of investment and large output losses in different parts of the world. Three generation of models that have been presented in the literature showed that there is no single cause, hence, nor is there a single cure for the crises. Keeping sound fundamentals no longer seem enough to avoid the crises. In order to better prepare for the possible future crises, Krugman (2001) proposed to focus on the effects of asset prices as a key linkage in a financial crisis in his fourth-generation crisis model. Taking the matter one step further, Semmler, et al. (2005) analyzed the effects of the depression in financial markets as well as in product markets on the European economy. In this dissertation I look into the possible negative consequences of depression in U.S. financial markets under the zero bound interest rates, making use of simulation models.