Restoring the Credibility of the Legal and Economic Foundations of Financial Stability

Restoring the credibility of the legal and economic foundations of financial stability: The need for incorporation of economic theories?

To what extent can monetary and financial crises and cycles be explained through economic theories? This paper is aimed at highlighting why a reliance on economic theories may be necessary given certain flaws which have been revealed from the recent Financial Crisis. Namely, that economic and legal foundations of financial stability cannot always be considered to be credible. Further, the paper aims to accentuate on why despite the valid argument (that a reference to economic theories may be required to explain causalities of financial and monetary crises), causalities could also be explained from other perspectives – even though these perspectives may sometimes, not be as accurate.