FEEDBACK MECHANISM IN MONEY MARKETS AND FINANCIAL CRISES / Para Piyasalarında Geri Besleme Mekanizması Ve Finansal Krizler
Abstract
The
theory of reflexivity was put forward by George Soros in 1988 and is based
mainly on the argument that the efficient market hypothesis of mainstream
economics is not valid. Contrary to the mainstream economics theory, neither
market participants nor monetary and fiscal authorities can make decisions
based solely on knowledge. Accordingly,
instead of equilibrium in long run, boom/bust cycles are inevitable in
financial markets. The underlying factor behind this view is that prices set by
irrational market participants affect the fundamentals, which affect prices,
etc., in a “reflexive” feedback loop. With the feedback mechanism, ballooning
and rapid fading of the system at the market is inevitable. In this context,
the theory of reflexivity questions the existence of the market equilibrium
process, emphasizing expectations in accordance with the Keynesian view.
References
- Davidson, P. (2006). Keynes and Money, P. Arestis and M. Sawyer (Ed), A Handbook of Alternative Monetary Economics (s.139-153) içinde. Edward Elgar, Cheltenham, UK and Northampton, Mass.
- Davidson, P. (2009). Can Future Systemic Financial Risks Be Quantified? Ergodic Vs Nonergodic Stochastic Processes. Revista de Economia Política, 29 (4), 324-340.
- Davidson, P. (2012). Is Economics a Science? Should Economics Be Rigorous?. Real-World Economics Review, 59, 58-66.
- Kahneman, D. and Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263.
- Keynes, J. M., 1883-1946 (1936). The General Theory of Employment, Interest and Money. London:Macmillan.
- Kwong, C. P. (2009). Mathematical Analysis of Soros's Theory of Reflexivity. Erişim adresi: https://pdfs.semanticscholar.org/6628/ef1ae2b4cc0669ecaf64c06e14 98d9997fe7.pdf
- Minsky, H. P., (1992). The Financial Instability Hypothesis. The Jerome Levy Economics Institute Working Paper No. 74. Erişim adresi: https://ssrn.com/ abstract=161024
- Nell, E.J. (2011). Uncertainty and the Value of Capital: Marginal Efficiency and the Conventional Projection. Review of Political Economy, 23(4), 479-502.
- Nell, E.J., Errouaki, K. (2013). Rational Econometric Man: Transforming Structural Econometrics. Cheltenham: Edward Elgar.
- Palley, T. (2005). Soros on International Capital Markets and Developing Economies: Multiple Equilibria and the Role of Policy. Eastern Economic Journal, 31(3), 407-419.
- Purkis, S., Güngör, F. (2016). Drifting Here and There but Going Nowhere: The Case of Migrants from Turkey in Milan in the Era of Global Economic Crisis. Journal of International Migration and Integration, 18 (2), 439-461.
- Rosnay, J. (1979). The Macroscope: A New World Scientific System. New York: Harper and Row.
- Shaikh, A., (2010). Reflexivity, Path Dependence and Disequilibrium Dynamics. Journal of Post Keynesian Economics, 33(1), 3-16.
- Soros, G. (1994). Theory of Reflexivity, The MIT Department of Economics World Economy Laboratory Conference, Washington, DC. Erişim adresi: http://mertsahinoglu.com/ research/the-theory-of-reflexivity-by-george-soros/.
- Soros, G. (1988). The Alchemy of Finance: Reading The Mind of the Market. London: Weidenfeld and Nicolson.
- Soros, G. (1995). Soros on Soros: Staying Ahead of the Curve. New York: John Wiley and Sons.
- Soros, G. (2009). The Crash of 2008 and What It Means. New York: Public Affairs.
- Soros, G. (2013). Fallibility, Reflexivity and The Human Uncertainty Principle. Journal of Economic Methodology, 20 (4), 309-329.
- Umpleby, S. (2010). From Complexity to Reflexivity: Underlying Logics Used in Science. Journal of the Washington Academy of Sciences, 96(1), 15-26.
PARA PİYASALARINDA GERİ BESLEME MEKANİZMASI VE FİNANSAL KRİZLER / Feedback Mechanism In Money Markets And Financial Crises
Abstract
Refleksivite
teorisi 1988 yılında George Soros tarafından ortaya atılmış ve temelde ana akım
iktisat yaklaşımında yer alan etkin piyasa hipotezinin geçerli olmadığı savına
dayanmaktadır. Ana akım iktisat teorisinin aksine, ne piyasa katılımcıları ne
de parasal ve mali otoriteler kararlarını salt bilgiye dayandırabilirler. Buna
göre piyasalarda uzun dönemde denge yerine varlık balonları oluşması
kaçınılmazdır. Bu görüşün altında yatan esas etken irrasyonel piyasa
katılımcıları tarafından belirlenen piyasa fiyatlarının gerçek fiyatları ve
dönüşümlü olarak refleksiv geri besleme mekanizması içinde yeniden piyasa
fiyatlarını etkilemesidir. Geri besleme mekanizması ile piyasalarda sistemin
balonlaşması ve hızla sönmesi kaçınılmaz hale gelir. Bu bağlamda refleksivite
teorisi, Keynesyen görüş ile uyumlu bir şekilde beklentilere vurgu yaparak,
piyasa denge sürecinin varlığını sorgular.
References
- Davidson, P. (2006). Keynes and Money, P. Arestis and M. Sawyer (Ed), A Handbook of Alternative Monetary Economics (s.139-153) içinde. Edward Elgar, Cheltenham, UK and Northampton, Mass.
- Davidson, P. (2009). Can Future Systemic Financial Risks Be Quantified? Ergodic Vs Nonergodic Stochastic Processes. Revista de Economia Política, 29 (4), 324-340.
- Davidson, P. (2012). Is Economics a Science? Should Economics Be Rigorous?. Real-World Economics Review, 59, 58-66.
- Kahneman, D. and Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263.
- Keynes, J. M., 1883-1946 (1936). The General Theory of Employment, Interest and Money. London:Macmillan.
- Kwong, C. P. (2009). Mathematical Analysis of Soros's Theory of Reflexivity. Erişim adresi: https://pdfs.semanticscholar.org/6628/ef1ae2b4cc0669ecaf64c06e14 98d9997fe7.pdf
- Minsky, H. P., (1992). The Financial Instability Hypothesis. The Jerome Levy Economics Institute Working Paper No. 74. Erişim adresi: https://ssrn.com/ abstract=161024
- Nell, E.J. (2011). Uncertainty and the Value of Capital: Marginal Efficiency and the Conventional Projection. Review of Political Economy, 23(4), 479-502.
- Nell, E.J., Errouaki, K. (2013). Rational Econometric Man: Transforming Structural Econometrics. Cheltenham: Edward Elgar.
- Palley, T. (2005). Soros on International Capital Markets and Developing Economies: Multiple Equilibria and the Role of Policy. Eastern Economic Journal, 31(3), 407-419.
- Purkis, S., Güngör, F. (2016). Drifting Here and There but Going Nowhere: The Case of Migrants from Turkey in Milan in the Era of Global Economic Crisis. Journal of International Migration and Integration, 18 (2), 439-461.
- Rosnay, J. (1979). The Macroscope: A New World Scientific System. New York: Harper and Row.
- Shaikh, A., (2010). Reflexivity, Path Dependence and Disequilibrium Dynamics. Journal of Post Keynesian Economics, 33(1), 3-16.
- Soros, G. (1994). Theory of Reflexivity, The MIT Department of Economics World Economy Laboratory Conference, Washington, DC. Erişim adresi: http://mertsahinoglu.com/ research/the-theory-of-reflexivity-by-george-soros/.
- Soros, G. (1988). The Alchemy of Finance: Reading The Mind of the Market. London: Weidenfeld and Nicolson.
- Soros, G. (1995). Soros on Soros: Staying Ahead of the Curve. New York: John Wiley and Sons.
- Soros, G. (2009). The Crash of 2008 and What It Means. New York: Public Affairs.
- Soros, G. (2013). Fallibility, Reflexivity and The Human Uncertainty Principle. Journal of Economic Methodology, 20 (4), 309-329.
- Umpleby, S. (2010). From Complexity to Reflexivity: Underlying Logics Used in Science. Journal of the Washington Academy of Sciences, 96(1), 15-26.
Details
| Primary Language | Turkish |
|---|---|
| Subjects | Economics |
| Journal Section | RESEARCH ARTICLES |
| Authors | |
| Publication Date | April 30, 2019 |
| Published in Issue | Year 2019 Volume: 3 Issue: 1 |
