New developments in financial economics
Journal of Financial Economic Policy
ISSN: 1757-6385
Article publication date: 18 August 2021
Issue publication date: 24 June 2022
Abstract
Purpose
This study aims to critically review recent contributions to the methodology of financial economics and discuss how they relate to one another and directions for further research.
Design/methodology/approach
A critical review of recent literature on new methodologies for financial economics.
Findings
Recent books have made important contributions to the study of financial economics. They suggest new approaches that include an emphasis on radical uncertainty, adaptive markets, agent-based modeling and narrative economics, as well as extensions of behavioral finance to include concepts such as diagnostic expectations. Many of these contributions can be seen more as complements than substitutes and provide fruitful directions for further research. Efficient markets can be seen as holding under particular circumstances. A major them of most of these contributions is that the study of financial crises and other aspects of financial economics requires the use of multiple theories and approaches. No one approach will be sufficient.
Research limitations/implications
There are great opportunities for further research in financial economics making use of these new approaches.
Practical implications
These recent contributions can be quite useful for improved analysis by researchers, private participants in the financial sector and macroeconomic and regulatory officials.
Originality/value
Provides an introduction to these new approaches and highlights fruitful areas for their extensions and applications.
Keywords
Acknowledgements
This article is dedicated to the memory of Clas Wihlborg, a friend of this journal and a great example that a serious scholar can also be full of good humor.
The author would like to thank Mohammed Alshowaikhat, Francis Assenga, James Barth, Graham Bird, Art Denzau, Kim Donaldson, Levan Efremidze, John Kay, Mervyn King, Steve Kohlhagen, Clemes Kownatzki, Andrew Lo, Vivek Morthy, Eric Pentecost, Dennis Logue, Ramakishen Rajan, Ravi Roy, John Rutledge, Ozan Sula, Richard Sweeney, Clas Wihlborg, and Cara Xiao, as well as participants in the Claremont Workshop on International Money and Financial Economics for many helpful comments on earlier drafts.
Citation
Willett, T.D. (2022), "New developments in financial economics", Journal of Financial Economic Policy, Vol. 14 No. 4, pp. 429-467. https://doi.org/10.1108/JFEP-04-2021-0113
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited