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A Behavioral Finance Approach to International Monetary and Financial Analysis: Implications and Evidence
Author(s): Thomas D. Willett (Author)
- Publisher: Cambridge University Press
- Publication Date: June 11, 2026
- Language: English
- Print length: 75 pages
- ISBN-10: 1009694014
- ISBN-13: 9781009694018
Book Description
Efficient market theory has made an important contribution to economic and financial analysis, but markets do not always behave according to the theory’s predictions. The behavioral finance approach advocated in this Element is a complement to efficient market theory. The Element stresses the effects of perverse incentives, complexity, and uncertainty, as well as the roles of mental models or narrative and behavioral biases. It emphasizes limits to arbitrage, suggesting that international capital mobility is often far from perfect. It reviews popular models and considers alternatives in areas such as currency crises, exchange rates and the balance of payments, the international monetary trilemma, capital flow surges and sudden stops, and the discipline effects of international financial markets. The behavioral approach of the Element also helps to explain why governments often fail to undertake necessary policy adjustments in time to head off currency and financial crises.
Editorial Reviews
Book Description
This Element examines behavioral finance and applies it to several important international monetary and financial issues.
