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Financial and economic commentary reflecting Ativo’s world view:

Financial crises are caused by cross-border investment flows, not misbehavior, says economist Robert Aliber

Friday, October 31, 2014

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Financial crises are widely believed to be caused by greed, corruption, or lack of regulation. But what if the cause is simply the variability of cross-border investment inflows? That’s the model developed by Robert Aliber, professor emeritus of international economics and finance at the University of Chicago Booth School of Business. Aliber, editor and co-author with Charles P. Kindleberger of the 1978 classic Manias, Panics, and Crashes: A History of Financial Crises, predicted the Icelandic banking crisis 18 months before it happened. In an interview with CFA Institute Magazine, Aliber offers a different view on the cause of financial crises, discusses why banking crises almost always coincide with currency crises, and explains why cross-border investment flows should be moderated.  Click here to read pdf of full interview.

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