APPLIES TO ACADEMIC YEAR 2014/2015

ELE 3732 Financial bubbles, crashes and crises

Responsible for the course
Sverre Knutsen, Mikael Lønnborg

Department
Department of Innovation and Economic Organisation

Term
According to study plan

ECTS Credits
7,5

Language of instruction
English

Introduction
The US. Sub-Prime crisis and the subsequent global financial crisis have contributed to a deep and prolonged recession in the global economy. What were the causes of the recent financial crisis? Why did it spread so rapidly internationally? How have authorities in affected countries dealt with them?

There are different and often competing theories about the causes, effects and how to deal with financial crises. The course will provide an overview of the varying approaches and schools of thoughts on financial instability. Furthermore, the course will focus on a selection of historical cases on financial crashes and crises in order to demonstrate differences as well as similarities between recent and past crises.

Learning outcome
Since financial crises affect most areas of the economy, knowledge about them is of importance to most people who work on economic issues.

Acquried knowledge
The students shall acquire a broad base of theoretical and empirical knowledge on financial stability and financial crises in a historical perspective. The students will also learn about regulatory issues and central aspects of crisis management in the past and how they relate to current problems.

Acquried skills
The students will acquire skills necessary to distinguish between different theories about causes and effects of financial crises, and apply this knowledge for analytical purposes. Moreover, students will obtain the skills to work on tasks within supervision, the development of financial structure, ratings and the rating industry, etc. Acquired knowledge will also be important for management tasks in business and the civil service.

Reflection
On completion of the course the students will have a solid basis for ethical reflection upon ethical dilemmas connected to unfolding financial crises and have developed ability for critical theoretical and methodological reflection.

Prerequisites
None specific.

Compulsory reading
Books:
Kindleberger, Charles P. and Robert Z. Aliber. 2011. Manias, panics and crashes : a history of financial crises. 6th ed. Palgrave Macmillan. 356 s.
Mishkin, Frederic S. 2013. The economics of money, banking and financial markets. 10th ed. Pearson. Approximately 300 pages. Selected chapters. Information at the outset of course.

Collection of articles:
Knutsen, Sverre. Selection of articles - Financial bubbles, crashes and crisis. Handelshøyskolen BI. approx. 100 p

Recommended reading
Books:
Jonung, Lars, Jaakko Kiander, Pentti Vartia, eds. 2009. The Great financial crisis in Finland and Sweden : the Nordic experience of financial liberalization. Edward Elgar. 241 p
Reinhart, Carmen M., Kenneth S. Rogoff. 2009. This time is different : eight centuries of financial folly. Priceton University Press. pp 1-292

Articles:
Sjögren, Hans and Sverre Knutsen. 2010. Why do banking crises occur? : an evolutionary model of Swedish banking crises. I: Ögren, Anders, ed. : The Swedish financial revolution. Palgrave Macmillan. Ch. 11

Course outline
The coursewill address the following themes:

• Theories on financial crises
  • Minsky-Kindleberger
  • The Monetarist school
  • Other approaches
• Domestic debt and sovereign debt crises
• Regulation and supervision
• Four historical and comparative cases
  • The Nordic banking crises, 1987-1995
  • The Wall-street crash, the great depression and the crises of the 1930s
  • The Scandinavian banking crises of the 1920s
  • The US. subprime crisis 2007-2009 and the subsequent global financial crisis