RETHINKING CAPITAL MARKETS: THE LESSONS OF COPING WITH FINANCIAL INSTABILITY

The current financial crisis is a critical moment in the history of financial markets. The causes of the current crisis resemble those of many previous ones, although financial innovations and the process of financial globalization are clearly alterations of the previous frameworks. Our paper aims at providing an honest review of the major developments in financial markets during the current financial crisis and at contrasting them against some of the previous financial and economic crises. We develop our analysis by discussing the main features of financial markets in the era of globalization at the end of the 20(th) century and by addressing market cycles and their relation to crashes, crises and recessions. We also point out the main characteristics of the undergoing financial crisis and we confer about the lessons that previous crises offer for authorities and investors as solutions for major financial turbulences.