The Interlocked Nature of the Crisis between the Financial and the Real Sector

08  June 2009    5:00 pm

Amit Bhaduri, Jawaharlal Nehru University and Indian Council of Social Development, New Delhi


wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)


The nature of interaction between the real and the monetary sector has always been a matter of controversy among economists, especially Keynesians and Monetarists. In the light of the current financial crisis, our theoretical understanding needs to be reexamined. This will be attempted by first presenting a brief historical sketch of how the financial sector of the United States changed in the last two decades or so and a historical comparison in some respects with Britain's attempt and failure to resurrect the Gold Standard after the First World War (1926-1931). We then try to outline how the transformed financial sector interacts with the real economy to precipitate a crisis, and some directions for policy.