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This paper contains a critique of much Of the work on politico‐economic models. These models are criticized on four grounds: that they should have a more explicit economic structure, that they should be estimated by systems estimators to prevent simultaneity bias, that they should be subjected more to full‐model simulations, and that the estimations should be carried out over each election period separately better to reveal parameter instability. The hypotheses are tested on a monthly model of Sweden for the period 1970–82. It turns out that the interaction between the economy and the polity in this period is so small that the first three points of criticism are irrelevant. Estimated parameters in the evaluation function and in the policy function(s) are, however, so unstable as to cast doubt on the relevance of politico‐economic models. This does not deny that there may be an interaction on specific instances, but there does not appear to be a systematic relationship.

We have just experienced the worst financial crash the world has seen since the Great Depression of the 1930s. While real economies in general did not crash as they did in the 1930s, the financial parts of the economy certainly did, or, at least, came very close to doing so. Hundreds of banks in the United States and Europe have been closed by their supervisory authorities, forcibly merged with stronger partners, nationalized or recapitalized with the tax payers' money. Banks and insurance companies had, by mid 2010, already written off some 2000 billion dollars in credit write-downs on loans and securities. In this book, Johan Lybeck draws on his experience as both an academic economist and a professional banker to present a detailed yet non-technical analysis of the crash. He describes how the crisis began in early 2007, explains why it happened and shows how it compares to earlier financial crises.

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