Journal Article
The Psychology of Financial Crises
Central European Review of Economics and Finance
Authors
Publication Date
JEL Classification
D01
Key Words
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.
