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September 5, 2011 The Financial System Is Subject to Psychological Factors

More regulation alone is not the solution. This is one of the conclusions that one must necessarily draw from the global financial crisis in 2008 and 2009, and it is a conclusion that will provide the point of departure in the session entitled The Economics and Psychology of Building Sustainable Finance at the Global Economic Symposium (GES) 2011. “A stable and sustainable financial system has to have a combination of regulatory constraints, well-balanced economic incentives, and psychological factors,” states Steffen Ahrens, who is a researcher in the Monetary Policy under Market Imperfections Research Area at the Kiel Institute and who is also one of the organizers of this session.

Economics has enabled us to understand financial markets better, but it nevertheless has not been able to give us a basic model of how financial factors and psychological factors affect each other. It is, however, precisely psychological factors, that can bring about bubbles like the real estate bubble in the US during the recent crisis and that thus can cause instability in the markets. Knowledge about these factors is essential to being able to recognize crises early enough to prevent them.

How can we develop an early warning system for economic bubbles? What institutions could develop such a system? What information would they need to do so? And what kind of regulatory measures could provide incentives to recognize risks better? These and other questions will be discussed at the Global Economic Symposium in Kiel.

Kiel will turn into a think tank on 4–6 October, when more than 400 high-ranking experts from business, government, academia, and civil societies will meet for the fourth Global Economic Symposium (GES), which is being jointly hosted by the Kiel institute for the World Economy and the Bertelsmann Stiftung, in cooperation with the German National Library of Economics (ZBW) – Leibniz Information Centre for Economics. Among those expected to participate are Hans-Paul Bürkner, President and CEO of the Boston Consulting Group, René Obermann, CEO of Deutsche Telekom, Yves Leterme, Prime Minister of Belgium, and Erik Stark Maskin and Oliver E. Williamson, both Nobel laureates in economics.

To register to attend, please submit the accreditation application form by September 19. It may not be possible to accept late registrations for security reasons. Applications made on the days of the event will not be accepted. Our media agency will gladly help you arrange interviews. Please mention on your accreditation application form whom you would like to interview.

Please note that the conference will be held in English.

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