ELE 3732 Financial Bubbles, Crashes and Crises
ELE 3732 Financial Bubbles, Crashes and Crises
The objective of this course is twofold. First, to provide basic knowledge about the financial system and to present theories, concepts and historical cases relevant to the understanding of financial bubbles, crashes and crisis. Second, to facilitate learning through the systematic use of writing exercises and, consequently, to teach the students how to plan, structure and write an analytical text.
Background and course content
According to an estimate from the International Monetary Fund (IMF), between 1970 and 2011 alone, the world experienced no less than 147 systemic banking crises, 218 currency crises and 66 sovereign debt crises. Such financial crises often have devastating effects on the operation of the general economy: they cause decline in investment spending, reductions in business profits, and an increase the number of bankruptcies. They also increase unemployment levels and reduce overall household income. According to figures from The US Bureau of Labor Statistics, unemployment rates in USA more than doubled in the years immediately following the financial crisis of 2008. This crisis – often termed The Great Recession or The Subprime Crisis – spread globally and caused, according to one estimate, an increase in global unemployment of about 50 million and an increase in the number of people living in extreme poverty of about 200 million (Stiglitz, 2010, p. 346).
What are the fundamental characteristics of financial crises and why do they appear so frequently? How do the various institutions of the financial system function and what are their roles in the development and handling of financial bubbles, crashes, and crises? What are the main theories of the causes of financial crises and what are their main strengths and weaknesses? How have existing crises developed historically and what can be done to prevent them in the future?
These are some of the questions we ask, discuss, and try to answer in this course. As the students will experience, there exist many different and often competing theories about the causes and effects of financial crisis and how to deal with them. This course provides an overview of these approaches. In addition, it introduces the students to a number of historical case studies of financial bubbles, crashes and crises. The idea is that by investigating past experiences of financial crises we can recognize patterns in how the crises evolved and also evaluate how they were handled. Such historical knowledge may in turn help shed light on how to deal with and assessing future risks of crisis in the economy and how to deal with such crisis.
Besides regular lectures, video lectures and group work the teaching of this class will be conducted through the systematic use of writing exercises. The students will be asked to hand in two written assignments during the semester. These make up a major basis for the final exam, which will consist of an academic essay presenting and discussing major concepts, theories and historical cases of financial crises.
The course will thus provide the students both with knowledge about a fundamental part of the market economy (the financial sector) – and how and why this sector historically has experienced repeated and severe crises – and improve their skills in writing analytical texts. This skill does not only represent a valuable preparation for writing the bachelor thesis, but is also fundamental to any job attainable for a graduated business school student.
During the course, students shall acquire:
- Knowledge about fundamental concepts (such as financial crises and financial bubbles) and about the important institutions of the financial system (such as banks, central banks and regulatory authorities).
- In-debt knowledge about various existing theories of financial crises.
- In-debt knowledge about selected historical cases of financial crisis.
- Basic knowledge and experience of how to plan, structure and write an analytical text.
After completed course students should be able to:
- Critically and systematically describe and discuss concepts and institutions central to the understanding of the financial system.
- Distinguish between different theories on the causes and effects of financial bubbles, crashes and crises, to apply this knowledge for analytical purposes and to present their analysis in writing.
- Critically and systematically present, explain and compare selected historical cases of financial crises and to present their analysis in writing.
After completed course, students should be able to:
- Reflect on how theories of social phenomena – such as financial crises – are constructed, contested and developed, including how differences in methodological approach may affect our understanding of social processes.
- Reflect on the value of historical knowledge for the understanding of present day problems.
- Reflect on the various ethical dilemmas connected to the development of financial crises and the different ways of solving them.
- Reflect on the role of international finance in the future development of a sustainable economy.
The course will be divided in a theoretical and a more empirical, or historical, part. In addition, the students will work on their academic essay throughout the entire semester.
The theoretical part will
- Present a number of basic concepts necessary to understand the development of financial crisis.
- Describe the most important institutions within the financial system, including money, banks, central banks and regulatory agencies.
- Present, compare and contrast a selected set of theories of financial crises
The empirical, or historical, part will present several historical case studies of financial crises, including
- The Wall Street crash, the Great Depression and the crisis of the 1930s,
- The Norwegian banking crisis of the early 1990s, and
- The Great Recession, 2007-2009.
The academic essay will consist of three main parts. Drafts of the two first parts should be handed in and will be evaluated at set dates during the semester:
- First individual assignment: Concepts and institutions
- Second individual assignment: Theories of financial crises
- Term paper/Exam: Concepts/institutions, theories and historical cases.
The course consists of lectures, video lectures, a podcast, discussion groups, class discussions, writing exercises, written assignments and student peer review.
During the course, two assignments will be published on Itslearning. The assignments must be solved individually, and the lecturer – as well as fellow students – will provide feedback on the assignments. These assignments are not mandatory (and will not be graded), but it is highly recommended to hand them in. To be evaluated, the assignments have to be submitted on the agreed date and time.
The two, revised, assignments form a major basis for the term paper/exam, which is mandatory and should be handed in at the end of the semester in WiseFlow.
The lectures and the written assignments should also prepare the students for the individual short-answer exam, held after the term paper has been submitted.
For electives re-sit is normally offered at the next scheduled course. If an elective is discontinued or is not initiated in the semester it is offered, re-sit will be offered in the electives ordinary semester.
Higher Education Entrance Qualification
Disclaimer
Deviations in teaching and exams may occur if external conditions or unforeseen events call for this.
No specific prerequisites required.
| Assessments |
|---|
Exam category: Submission Form of assessment: Submission PDF Exam/hand-in semester: First Semester Weight: 70 Grouping: Individual Duration: 5 Week(s) Comment: The two previous, revised, assignments form a major basis for the final academic essay, and should be handed in at the end of the semester in WiseFlow. All exams must be passed to obtain a final grade in the course. Exam code: ELE 37322 Grading scale: ECTS Resit: Examination when next scheduled course |
Exam category: School Exam Form of assessment: Written School Exam - digital Exam/hand-in semester: First Semester Weight: 30 Grouping: Individual Support materials:
Duration: 1,5 Hour(s) Comment: Short-answer exam designed to test students' recall of facts and course material and to demonstrate their understanding of that knowledge. All exams must be passed to obtain a final grade in the course. Exam code: ELE 37323 Grading scale: ECTS Resit: Examination when next scheduled course |
All exams must be passed to get a grade in this course.
| Activity | Duration | Comment |
|---|---|---|
Teaching | 30 Hour(s) | The teaching consists of lectures, discussion groups, class discussions and writing exercises |
Prepare for teaching | 84 Hour(s) | Read curriculum and discuss in study groups |
Submission(s) | 86 Hour(s) | During the course, two assignments will be given on Itslearning. The assignments must be solved individually and handed in at the set date and time. These assignments are not mandatory (and will not be graded). The assignments form a major basis for the final academic essay/exam. |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.