FIN 254f(2): Financial Manias and Crises

Lecture Notes

Course Outline

  1. Some bubble theories and taxonomy
    1. Bubbles: Definitions and mechanisms
      Kindleberger and Aliber, chapter 2-3.
      Bubble Taxonomy
    2. Types of bubbles
      Reinhardt/Rogoff chapter 1.
    3. The contribution of credit
      Kindelberger chapter 4, Reinhart and Rogoff, chapter 2
  2. History
    1. Old classic bubbles
      Kindleberger and Aliber, chapter 1,6-7.
      Garber, Famous First Bubbles, Journal of Economic Perspectives .
      Frehen, Goetzmann, and Rouwenhorst, New Evidence on the First Financial Bubble, NBER wp 15332, 2009.
      Classic Bubbles
    2. Banking crises and middle history
      Reinhart and Rogoff, chapters 10-12
      Banking crises
      (B) Allen and Gale, Understanding Financial Crises, chapter 1.
    3. Stock markets and an introduction to international contagion
      Shiller, chapter 1.
      Kindleberger and Aliber, chapter 8. Cutler, Poterba, and Summers, What moves stock prices?, Journal of Portfolio Management 1989:4-12.
      Stock markets and real estate
    4. Real estate
      Shiller, chapter 2.
    5. History, stories, and amplification mechanisms
      Shiller, chapter 3-7.
      History and stories
    6. Macro connections
      Claessens, Kose, and Terrones, What happens during recessions, crunches and busts, IMF working paper, 08/274.
      Macro connections
      (B) Gorton, Banking panics and business cycles, Oxford Economic Papers, 40, 751-781.
  3. Psychological foundations
    Shiller, chapter 8-9.
    Nofsinger, chapters 1, 2-5.
    Behavioral Finance
  4. Bubbles in the laboratory
    Porter and Smith, Stock market bubbles in the laboratory, Journal of Behavioral Finance , 2003: 4, pp 7-20.
    Experimental Bubbles
  5. Crisis of 2008-2009, descriptions and historical perspectives
    *Reinhart and Rogoff 13-14.
    Brunnermeier, Deciphering the 2007-2008 liquidity and credit crunch, Journal of Economic Perspectives, 23, 77-100.
    Gorton, Slapped in the Face by the invisible hand: Banking and the Panic of 2007.
    *Gorton, Questions and answers about the financial crisis, NBER working paper 15787, 2010.
    (B) Adrian and Shin, The Shadow Banking System: Implications for financial regulation, Federal Reserve Board of New York, Staff Reports, 2009.
    *(skim)Jagannathan, Kapoor, and Schaumburg, Why are we in a recession? The financial crisis is the symptom not the disease!, NBER working paper 15404, 2009.
    *Gjerstad and Smith, From Bubble to Depression, WSJ, April 6, 2009.
    *Greenspan, The Crisis, 2010. The Crisis
    *Acharya, Cooley, Richardson, and Walter, Manufacturing tail risk: A perspective on the financial crisis of 2007-09, 2010, NYU working paper.
    Crisis lecture notes
  6. Contagion and networks
    Reinhart and Rogoff, 15-16. Shiller, 8.
    Nofsinger, chapter 8.
    Haldane, Rethinking the financial network, Bank of England, 2009.
  7. Simulating financial crises: An introduction to agent-based models