Close relations on the financial markets and irreducible unstable economic performances

• Author: Madalina Antoaneta Radoi - Alexandru Olteanu
• Position: Lecturer, Economic Sciences Faculty, 'Nicolae Titulescu' University, Bucharest - Professor, Economic Sciences Faculty, 'Nicolae Titulescu' University, Bucharest
• Pages: 181-190

Madalina Antoaneta Radoi • Alexandru Olteanu

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LESIJ NR. XVIII, VOL. 2/2011

CLOSE RELATIONS ON THE FINANCIAL MARKETS AND

IRREDUCIBLE UNSTABLE ECONOMIC PERFORMANCES

M<d<lina Antoaneta R;DOI*

Alexandru OLTEANU*

Abstract

The evolution of the market development of any kind registered an overlapping and

conditioning of financial markets and economic performances, reinforcing, after the 80’s, the

connections between the financial system and industrial economy in relation to the age of

conglomerates. Although the financial system uses its assumed functions of not being responsible

for the cyclic instability of the economies, which has a negative influence over the average rate of

economic growth over long periods, macroeconomic analyses reflect the financial origins of cyclic

instability.

Keywords: Neoclassical financial market, neoclassical general equilibrium model, basic

Walrasian model, strong-form and semi-strong financial market efficiency, capital markets

general equilibrium model, marginal efficiency of capital.

Introduction

The functioning of the markets is mainly based on two models, the “Neoclassical general

equilibrium model” and the “Basic Walrasian model”.

The neoclassical general equilibrium model comprises the general equilibrium properties

of commodities markets and capital goods and of financial markets. Within these we find the same

form: the atomicity of supply and demand, homogeneity of products, transparency of exchanges,

and mobility of financial resources. In a perfect competition, the free allocation of capital allows

continuously raising their economic performances at an optimal level.

The basic Walrasian model has multiple characteristics: economic and financial decisions

are made by rational individuals who are perfectly informed regarding market conditions at any

given moment; the markets have monopoly over the aggregation and alignment of supply and

demand; the so-called pure and perfect “competition” excludes all forms of power over prices; the

equilibrium prices are a result of anonymous forces.

The model brings a response to one of the problems that continue to be asked for over a

century. It incites to an approach based on the specificity of the nature of the relations between the

financial market and economic performances, taken as a whole.

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* Lecturer, Economic Sciences Faculty, “Nicolae Titulescu” University, Bucharest, radoimadalina@univnt.ro

* Professor, Economic Sciences Faculty, “Nicolae Titulescu” University, Bucharest (e-mail: aolteanu@univnt.ro)