Financial Instability Toolkit for Interpreting Boom and Bust Cycles

by D'Apice, Vincenzo; Ferri, Giovanni

• ISBN13: 9780230248113
• ISBN10: 023024811X
• Format: Hardcover
• Copyright: 2010-06-15
• Publisher: Palgrave Macmillan

Summary

Why have financial crises been increasingly frequent and severe in the past 30 years? How can financial crises be prevented? What role do governments and international institutions play in their prevention? How does the latest crisis fit in the long-term political-economy cycle of finance?

Author Biography

Vincenzo D'Apice is Economist in the Research Department of the Italian Banking Association. His research interests include international finance, banking and regulation. He is currently undertaking economic research at the Istituto Einaudi, Italy.
Giovanni Ferri is Chair of the Department of Economics, University of Bari, Italy. He previously worked for the World Bank and the Banca d'Italia. He has published extensively on money and credit economics.

Table of Contents

List of Figures	p. ix
List of Tables	p. xii
List of Boxes	p. xiii
Foreword	p. xv
Acknowledgements	p. xix
Glossary	p. xx
Introduction	p. 1
Understanding the Financial Crises	p. 7
Theories of Financial Crises	p. 9
The Minsky model	p. 9
Management and prevention of crises	p. 14
Macro Models of Financial Crises	p. 17
The first-generation models	p. 17
The second-generation models	p. 21
The third-generation models	p. 22
Micro Models of Financial Crises	p. 25
Adverse selection and moral hazard	p. 25
The role of the banking system	p. 26
Asymmetric information and financial crises	p. 27
Transmission Channels of Financial Crises	p. 29
Money view	p. 29
Credit view	p. 29
The credit rating agencies	p. 31
The International Monetary Fund	p. 34
Liberalization, Crises and Mega-Corporate Bankruptcies	p. 37
The Great Depression of the 1930s	p. 39
The debate on the causes of the Great Depression	p. 42
From Bretton Woods to Financial Globalization	p. 45
Recent Financial Crises	p. 48
The Latin American crisis of the 1980s	p. 49
The Savings & Loan crisis	p. 51
The Scandinavian crisis	p. 57
The Mexican crisis of 1994-95	p. 64
The East Asian crisis of 1997-98	p. 69
The Russian crisis and the collapse of LTCM	p. 79
The Crisis of Turkey and Argentina	p. 89
The Japanese depression	p. 102
The Mega-Bankruptcies of the Early 2000s	p. 110
Enron	p. 111
Parmalat	p. 113
Similarities and differences between Enron and Parmalat	p. 115
Untrustworthy auditing	p. 116
The Great Crisis of 2007-09	p. 119
The Great Crisis of 2007-09	p. 121
The chronology of the crisis	p. 121
From liquidity crisis to financial crisis: amplification mechanisms	p. 137
Transmission of the US subprime crisis to emerging markets	p. 144
Origin of the crisis: macro elements	p. 146
Origin of the crisis: micro elements	p. 158
Crisis in Academic Economics	p. 170
Questionable risk-pricing models derived from the finance theory	p. 171
Fallacious evolutionary view subordinating banks to financial markets	p. 175
Improvident monetary policy conduct by the Fed	p. 181
Conclusions and Perspectives	p. 184
Appendix: Some Useful Definitions	p. 201
Notes	p. 204
References	p. 207
Index	p. 215
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