Journal Article

The Psychology of Financial Crises

Central European Review of Economics and Finance

Traditional economic theory has tried to explain speculative bubbles as the result of rational economic behavior – and has failed. This calls for the integration of sociopsychological patterns, which allow capturing irrational behavior in economic analyses. The paper suggests four fundamental psychological pitfalls derived from the theory of cognitive dissonance, which might be at the roots of the present financial crisis and which should better not be ignored by monetary policy makers.

Author

Henning Klodt

Info

Publication Date
JEL Classification
D01