This book examines the main causes of financial instability and highlights that,with the exception of wars and pandemics, the financial system is the source of thecrisis, not just a means of spreading it, as most mainstream experts believe. Based onthe following findings, the innovative sections of this book provide academics andpolicymakers with important and practical knowledge: because negative shifts in thefinancial system precede recessions, financial indicators can predict the onset of acrisis much earlier than real variables; the proposed recession forecasting model canpredict the emergence of the crisis a month in advance. When the economy’s sensitivityto the financial system is reduced, there will be only modest negative economicgrowth and no true recessions.

This book examines the main causes of financial instability and highlights that,with the exception of wars and pandemics, the financial system is the source of thecrisis, not just a means of spreading it, as most mainstream experts believe. Based onthe following findings, the innovative sections of this book provide academics andpolicymakers with important and practical knowledge: because negative shifts in thefinancial system precede recessions, financial indicators can predict the onset of acrisis much earlier than real variables; the proposed recession forecasting model canpredict the emergence of the crisis a month in advance. When the economy’s sensitivityto the financial system is reduced, there will be only modest negative economicgrowth and no true recessions.