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Professor Jagjit Chadha explains the 1987 crash to his students

Written by Professor Jagjit Chadha Monday, 22 October 2012 21:06
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Jagjit Chadha is a Professor of Economics at the University of Kent.
 
We have not yet, as a profession, teased out the contribution to the business cycle from monetary policy actions.  
 
This is, in part, because there is not only considerable dispute on how to measure monetary actions but also we know that any results will be heavily dependent on the particular model that is chosen.  
 
There is another reason.  
 
We tend to think of policy as acting to stabilise the economy from shocks, so that agents will plan over the longer run in a manner consistent with the policymakers key objectives.  
 
But what if policy gets it wrong from time to time?  Then it has the ability to increase as well as reduce the volatility of the economic cycle.  And so working out the contribution to an event from something that both may have caused it and responded to it, turns out to be quite hard.
 
On Friday, at both my lectures, I reminded my students of the events of 19th October 1987, so-called Black Monday.  
 
Or rather given their youth, offered the historical account. 
 
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Last modified on Monday, 22 October 2012 21:15

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