Talk:Financial crisis

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Useful references[edit]

Mostly about banking crises:

  • Milton Friedman and Anna Schwartz (1971), A Monetary History of the United States.
  • Ben S. Bernanke (2000), Essays on the Great Depression.
  • Robert F. Bruner (2007), The Panic of 1907. Lessons Learned from the Market's Perfect Storm.
  • Franklin Allen and Douglas Gale (2007), Understanding Financial Crises.
  • Jean-Charles Rochet (2008), Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation.
  • R. Glenn Hubbard, ed., (1991) Financial Markets and Financial Crises.
  • Douglas Diamond and Philip Dybvig (1983), 'Bank runs, deposit insurance, and liquidity'. Journal of Political Economy 91 (3).
  • Luc Laeven and Fabian Valencia (2008), 'Systemic banking crises: a new database'. International Monetary Fund Working Paper 08/224.

Mostly about bubbles and crashes:

  • Charles P. Kindleberger (2005), Manias, Panics, and Crashes: A History of Financial Crises.
  • 'Of manias, panics, and crashes', obituary of Charles Kindleberger in The Economist, July 17, 2003.
  • Markus Brunnermeier (2008), 'Bubbles', New Palgrave Dictionary of Economics, 2nd ed.
  • John K. Galbraith (1997), The Great Crash 1929.
  • Hyman P. Minsky (1986, 2008), Stabilizing an Unstable Economy.
  • Robert J. Shiller (1999, 2006), Irrational Exuberance.
  • Robert J. Shiller (2008), The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do About It.
  • Markus K. Brunnermeier (2001), Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding, Oxford University Press. ISBN 0198296983.

Mostly about currency crises:

  • Paul Krugman (1995), Currencies and Crises.
  • Paul Krugman, ed., (2000), Currency Crises.
  • Craig Burnside, Martin Eichenbaum, and Sergio Rebelo (2008), 'Currency crisis models', New Palgrave Dictionary of Economics, 2nd ed.
  • Maurice Obstfeld (1996), 'Models of currency crises with self-fulfilling features'. European Economic Review 40.
  • Stephen Morris and Hyun Song Shin (1998), 'Unique equilibrium in a model of self-fulfilling currency attacks'. American Economic Review 88 (3).

Mostly about sudden stops:

  • Barry Eichengreen (2004), Capital Flows and Crises.
  • Charles Goodhart and P. Delargy (1998), 'Financial crises: plus ça change, plus c'est la même chose'. International Finance 1 (2), pp. 261-87.

Mostly about sovereign default:

  • Jean Tirole (2002), Financial Crises, Liquidity, and the International Monetary System.
  • Guillermo Calvo (2005), Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy?
  • Barry Eichengreen (2002), Financial Crises: And What to Do about Them.
  • Barry Eichengreen and Ricardo Hausmann, eds., (2005), Other People's Money: Debt Denomination and Financial Instability in Emerging Market Economies.
  • Barry Eichengreen and Peter Lindert, eds., (1992), The International Debt Crisis in Historical Perspective.
  • Charles Calomiris (1998), 'Blueprints for a new global financial architecture'.

Dr. De Koning's comment on this article[edit]

Dr. De Koning has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


"The term financial crisis is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal value.""Financial crises directly result in a loss of paper wealth but do not necessarily result in changes in the real economy."

The term financial crisis as defined in Wikepedia is associated with financial assets, banks,stock markets, currencies and defaults by governments. The 2007-2008 financial crisis was an individual household crisis, in households having an excessive exposure to U.S. home mortgages. The losses which occurred as a result of this crisis were real economy losses: income losses,job losses, repossessions of homes, lower government taxes, reduced demand for goods and services.

"Regulatory failures" "Some financial crises have been blamed on insufficient regulation, and have led to changes in regulation in order to avoid a repeat"

In my paper: "Helicopter money or a risk sharing approach? (https://mpra.ub.uni-muenchen.de/71922/) a distinction is made between the collective behaviour of banks and the total volume of outstanding home mortgages and an individual bank a single household. Collective regulation on a dynamic basis is needed rather than a worst case scenario planning system like Basel II Accord. Managing a collective of banks on a dynamic basis requires different tools: a "traffic light system" to slow down lending when needed; a "quality control system" on new mortgage products sold to households and a " Macro-Economic Reserve Policy". The latter Policy to be applied when -like in 2005-2006- the mortgage volumes became a threat to future economic growth.


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Dr. De Koning has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference : De Koning, Kees, 2014. "Financial crisis, economic crisis and individual households' income and savings crisis," MPRA Paper 53122, University Library of Munich, Germany.

ExpertIdeasBot (talk) 12:53, 15 June 2016 (UTC)

Dr. Rogoff's comment on this article[edit]

Dr. Rogoff has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


the article is somewhat disorganized of course, but not bad overall. Some corrections. Under "Currency crisis", it is not correct to say "There is no widely accepted definition of a currency crisis, which is normally considered as part of a financial crisis." A correct statement is "There is no widely universal definition of a currency crisis, which may or may not be part of a larger financial crisis."

The section "International Financial Crisis" it extremely weak "When a country that maintains a fixed exchange rate is suddenly forced to devalue its currency due to accruing an unsustainable current account deficit, this is called a currency crisis or balance of payments crisis." I would replace the entire section with the statement: "An international financial crisis is defined as a financial crisis with cross border ramifications. These may occur because a country defaults on debt to foreign creditors, because of a large exchange rate devaluation that puts competitive pressure on other countries, because of "herd behavior" by investors or retreat indiscriminantly from all emerging markets when one defaults, or due to a common shock (like a major tightening of US monetary policy) that creates problems in many countries at the same time. Reinhart and Rogoff (2009) in their book This Time is Different) categorize which finanancial crisis quality as truly global in that they affected in large part of the world. These include the 2008 financial crisis, the 1930s Great Depression and several crises from the 19th century.


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Dr. Rogoff has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference 1: Carmen Reinhart & Kenneth Rogoff, 2013. "Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten," IMF Working Papers 13/266, International Monetary Fund.
  • Reference 2: Kose, Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2006. "Financial Globalization: A Reappraisal," CEPR Discussion Papers 5842, C.E.P.R. Discussion Papers.

ExpertIdeasBot (talk) 15:23, 24 June 2016 (UTC)

Dr. Yetman's comment on this article[edit]

Dr. Yetman has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


Under "Types", International Financial Crisis seems to be a restatement of Currency crisis; I would suggest merging the two- especially the second paragraph. (Additionally, the "international financial crisis" is one of the names given to the specific events in 2008/2009, so is misleading in this context).

Under "Theories", Austrian theories really need expanding. (At an intuitive level, I understand the theory is one of mal-investment: too much investment in areas that do not contribute to economic growth lead to debts that cannot be repaid, and therefore a crisis). Sources: http://www.economist.com/node/17522368 https://mises.org/library/austrian-business-cycle-theory-and-global-financial-crisis-confessions-mainstream-economist https://fee.org/articles/the-current-economic-crisis-and-the-austrian-theory-of-the-business-cycle/

In the same section, under Marxist theories, it currently states "20 and 50 years (often referred to as the business cycle)". I suggest cutting the part in brackets: the business cycle generally refers to macroeconomic dynamics over a much shorter horizon- around 5-12 years.


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Dr. Yetman has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference : Stephen Cecchetti & Michael R King & James Yetman, 2011. "Weathering the financial crisis: good policy or good luck?," BIS Working Papers 351, Bank for International Settlements.

ExpertIdeasBot (talk) 18:35, 27 June 2016 (UTC)

I deleted the business cycle parenthetical under Marxist theories as recommended by Dr. Yetman. Further support for this change is supported by the dating of business cycles by the National Bureau of Economic Research.Msitar (talk) 21:30, 13 September 2016 (UTC)

Dr. Carbo Valverde's comment on this article[edit]

Dr. Carbo Valverde has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


I find this entry very complete. However, in the general definition, I would delete the sentence saying “Financial crises directly result in a loss of paper wealth but do not necessarily result in changes in the real economy.” The real effects of financial crisis could vary across countries and for different crises episodes but they are frequently significant and long-lasting. One of the references cited (Reinhart and Rogoff, 2009) is particularly useful to illustrate the real effects of financial crises.


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We believe Dr. Carbo Valverde has expertise on the topic of this article, since he has published relevant scholarly research:


  • Reference : Santiago Carbo-Valverde & Francisco Rodriguez-Fernandez, 2014. "Financial regulation in Spain," Working papers wpaper59, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

ExpertIdeasBot (talk) 15:24, 11 July 2016 (UTC)

Dr. Guidolin's comment on this article[edit]

Dr. Guidolin has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


1. "Examples of bank runs include the run on the Bank of the United States in 1931 and the run on Northern Rock in 2007."

Reference would be beneficial here: see e.g., Shin, Hyun Song. "Reflections on Northern Rock: the bank run that heralded the global financial crisis." The Journal of Economic Perspectives 23.1 (2009): 101-119.

2. Sections "International financial crisis" lacks references. See e.g., Radelet, Steven, and Jeffrey Sachs; The onset of the East Asian financial crisis. No. w6680. National bureau of economic research, 1998. Kaminsky, Graciela L., and Carmen M. Reinhart. "Financial crises in Asia and Latin America: Then and now." The American Economic Review 88.2 (1998): 444-448.

3. "Fraud has played a role in the collapse of some financial institutions, when companies have attracted depositors with misleading claims about their investment strategies, or have embezzled the resulting income. Examples include Charles Ponzi's scam in early 20th century Boston, the collapse of the MMM investment fund in Russia in 1994, the scams that led to the Albanian Lottery Uprising of 1997, and the collapse of Madoff Investment Securities in 2008.”

Reference would be beneficial.

4. "Contagion refers to the idea that financial crises may spread from one institution to another, as when a bank run spreads from a few banks to many others, or from one country to another, as when currency crises, sovereign defaults, or stock market crashes spread across countries. "

At least one case of contagion is missing, that is contagion from "one security market to another" (e.g. the US financial crisis originated from the ABS market but spread to fixed income and equity market. See, e.g. Bekaert, G., Ehrmann, M., Fratzscher, M., and Mehl, A., 2014. The global crisis and equity market contagion. Journal of Finance, 69, 2597-2649; Ehrmann, M., Fratzscher, M., and Rigobon, R., 2011. Stocks, bonds, money markets and exchange rates: measuring international financial transmission. Journal of Applied Econometrics, 26, 948-974; Guo, F., Chen, C. R., and Huang, Y. S., 2011. Markets contagion during financial crisis: A regime-switching approach. International Review of Economics and Finance, 20, 95-109.

4.”These theoretical ideas include the 'financial accelerator', 'flight to quality' and 'flight to liquidity', and the Kiyotaki-Moore model. Some 'third generation' models of currency crises explore how currency crises and banking crises together can cause recessions.[34]”

Add references regarding the 'financial accelerator', 'flight to quality' and 'flight to liquidity' and Kiyotaki-Moore model. References about "contagion channels" such as 'flight to quality' and 'flight to liquidity' include (but are not limited too): Longstaff, F. 2010. The subprime credit crisis and contagion in financial markets. Journal of Financial Economics, 97, 436-450; Guidolin, Massimo, Viola Fabbrini, and Manuela Pedio. Transmission Channels of Financial Shocks to Stock, Bond, and Asset-Backed Markets: An Empirical Model. Springer, 2015; Beber, A., Brandt, M. W., and Kavajecz, K. A., 2009. Flight-to-quality or flight-to-liquidity? Evidence from the euro-area bond market. Review of Financial Studies, 22, 925-957. For Kiyotaki-Moore you may cite their article: Kiyotaki, Nobuhiro, and John Moore. Credit cycles. No. w5083. National Bureau of Economic Research, 1995. For the 'financial accelerator’ you may see: Bernanke, Ben S., Mark Gertler, and Simon Gilchrist. "The financial accelerator in a quantitative business cycle framework." Handbook of macroeconomics 1 (1999): 1341-1393. Mody, Ashoka, and Mark P. Taylor. "Financial predictors of real activity and the financial accelerator." Economics Letters 82.2 (2004): 167-172.

5. The section Theories goes a bit beyond of the scope of illustrating “financial crisis”.


We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

We believe Dr. Guidolin has expertise on the topic of this article, since he has published relevant scholarly research:


  • Reference : Guidolin, Massimo, and Yu Man Tam. "A yield spread perspective on the great financial crisis: Break-point test evidence." International Review of Financial Analysis 26 (2013): 18-39.

ExpertIdeasBot (talk) 18:51, 26 July 2016 (UTC)

I addressed suggestion #1 and added the recommended reference Msitar (talk) 21:23, 13 September 2016 (UTC)

Dr. Wall's comment on this article[edit]

Dr. Wall has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


Comment 1

“The term financial crisis is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal value.” … “Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles” … “Financial crises directly result in a loss of paper wealth but do not necessarily result in changes in the real economy.”

Some support should be given for this definition of “financial crisis”. Stock prices go up and they go down. The mere fact that stock prices have declined significantly does not necessarily constitute a “crisis.” Ordinarily when I think of a crisis, I think of a financial crisis I think of something that has adverse consequences for other parts of the financial system or real economy. Some stock market crashes have substantial spillovers but others do not.

Comment 2 “Since banks lend out most of the cash they receive in deposits (see fractional-reserve banking), it is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run renders the bank insolvent, causing customers to lose their deposits, to the extent that they are not covered by deposit insurance.”

Several comments on this sentence. First, not all of a bank’s depositors need run a bank to cause it to become illiquid and fail. All that is required is that the run be so large that the bank cannot honor all of its obligations from its: (a) cash and reserves at the central bank, (b) the assets it can sell immediately, and (c) money it can borrow from other investors, banks and the central bank.

Second, a run may render a bank illiquid (unable to honor its obligations in a timely manner) but not necessarily insolvent (liabilities worth more than assets). Nevertheless, a bank that cannot make timely payments to its depositors and other creditors is subject to be closing by the banking authorities.

Third, bank failures generally do not cause customers to lose all of their uninsured deposits. Banks usually fail because the value of their assets is worth less than their liabilities. However, that does not mean the value of the assets has fallen to zero as implied by the quote. Generally the assets are worth something and uninsured depositors are entitled to their share of the proceeds as the assets are sold. This topic is covered briefly for the U.S. in the FDIC’s “Deposit Insurance FAQs” at https://www.fdic.gov/deposit/deposits/faq.html.

Comment 3 Comments on “Causes and consequences” section

There are three issues here: (a) why did asset prices drop so much, (b) what turned the asset price decline into a “crisis”, and (c) would better government policy have reduced the cost of the crisis without imposing other excessively high costs. It would help readers to separate these concepts.

In terms of asset price declines, the subsections on “Strategic complementarities in financial markets,” “Uncertainty and herd behavior” are most relevant. Also, although the “Economic bubble” article in Wikipedia may have an overly long section on central banks as a possible cause, on balance I find that entry to be a reasonable high level summary of contemporary economic views which have not converged on a single model.

The subsections on “Leverage”, on “Asset-liability mismatch” and on “Contagion” get at what are often the crucial factors in turning an asset price decline into a “crisis”. I would also include the “Recessionary effects” subsection in this discussion.

The “Regulatory failures” subsection addresses the issue of the role of public policy. This section should add a discussion of Basel III’s attempt to reduce the risk of financial crisis.

A discussion of whether monetary policy should be used to address incipient bubbles would be a useful addition to a section on public policy. Alan Greenspan famously argued that it’s better to clean up after a bubble than try to pop it with monetary policy. This issue has been the subject of further debate since the crisis. Lars Svensson provides some rigorous analysis that the costs of using monetary policy to forestall a crisis would be greater than the gains. The paper titled “ Cost-Benefit Analysis of Leaning Against the Wind: Are Costs Larger Also with Less Effective Macroprudential Policy?” is available at https://www.imf.org/external/pubs/ft/wp/2016/wp1603.pdf.


Comment 4 “Fraud has played a role in the collapse of some financial institutions, when companies have attracted depositors with misleading claims about their investment strategies, or have embezzled the resulting income. Examples include Charles Ponzi's scam in early 20th century Boston, the collapse of the MMM investment fund in Russia in 1994, the scams that led to the Albanian Lottery Uprising of 1997, and the collapse of Madoff Investment Securities in 2008.

Many rogue traders that have caused large losses at financial institutions have been accused of acting fraudulently in order to hide their trades. Fraud in mortgage financing has also been cited as one possible cause of the 2008 subprime mortgage crisis; government officials stated on September 23, 2008 that the FBI was looking into possible fraud by mortgage financing companies Fannie Mae and Freddie Mac, Lehman Brothers, and insurer American International Group.[32] Likewise it has been argued that many financial companies failed in the recent crisis because their managers failed to carry out their fiduciary duties.[33]”


Most of the discussion of fraud and rogue traders talks about asset price declines but it’s difficult to call these examples of a “financial crisis”. For example, almost no one in the academic financial community would regard the failure of Madoff Investment Securities as a “financial crisis.” The one part of this that is arguably relevant is the part on fraud in mortgage finance, which was a contributory factor to the subprime financial crisis (which actually started in 2007).

Comment 5 Section on “Theories”

As an overview, this section should reference the “Economic bubble” entry in Wikipedia, probably at the start.

The discussion of Austrian theories should be fleshed out in a little more detail. One paragraph should be sufficient.

The discussion of Marxist theories does not explain why asset prices become overvalued. If investors believe in Marxist theories and rationally price assets, then asset prices would fairly reflect the expected value of the cash flow from these assets. If profits were expected to fall over time, then asset prices would gradually decline as we approached the fall-off in profits. I would delete this discussion absent some explanation of why economic decline must lead to a crash in asset prices.


We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

We believe Dr. Wall has expertise on the topic of this article, since he has published relevant scholarly research:


  • Reference : Larry D. Wall, 2010. "Prudential Discipline for Financial Firms: Micro, Macro, and Market Structures," Working Papers id:3040, eSocialSciences.

ExpertIdeasBot (talk) 18:54, 30 August 2016 (UTC)

Dr. Fosu's comment on this article[edit]

Dr. Fosu has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


This is a nice and comprehensive article. I think regional effects of the recent 2007-2009 financial and economic crises might be helpful. For example, while the developed and other areas experienced major adverse economic effects from the financial crisis, the African region did not generally, at least initially (see for example Fosu, 2013).

Fosu, A. K. (2013). “Impact of the Global Financial and Economic Crisis on Development: Whither Africa?” Journal of International Development, 25(8): 1085-1104.


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We believe Dr. Fosu has expertise on the topic of this article, since he has published relevant scholarly research:


  • Reference : Augustin Kwasi Fosu & Naude, Wim, 2009. "Policy Responses to the Economic Crisis in Africa," Working Paper Series UNU-WIDER UNU Policy Brie, World Institute for Development Economic Research (UNU-WIDER).

ExpertIdeasBot (talk) 15:55, 28 September 2016 (UTC)