Chapter 3: The efficient-markets hypothesis after the crisis: a methodological analysis of the evidence
Economists belong to two camps when analysing the latest economic crisis. They are among the participating researchers (from different disciplines) analysing the crisis and examining the possibilities of avoiding any future economic crises. At the same time they are also part of the group accused of creating the crisis (and/or even having made it worse) in one way or another. Let me emphasize that in this chapter we are going to focus on reactions among economists of the financial crisis of 2007–08 that roughly started with the bankruptcy of Lehman Brothers (and not the current difficulties in the eurozone regarding especially the financial position of Greece). In the debates that have occurred concerning the financial crisis, what is known as the efficient market hypothesis (EMH hereafter) has been of special interest. In short, this hypothesis states that current asset prices reflect available information. Prominent economists have participated on both sides in the debate. In the criticizing team we have, for example, Paul Krugman. In a well-known column in the New York Times in 2009 titled ‘How did economists get it so wrong?’ he launched a quite fierce critique of the EMH (and what is known as neoclassical macroeconomics).
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