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ELE 3732 Financial bubbles, crashes and crises

ELE 3732 Financial bubbles, crashes and crises

Course code: 
ELE 3732
Department: 
Law and Governance
Credits: 
7.5
Course coordinator: 
Espen Ekberg
Product category: 
Bachelor
Portfolio: 
Bachelor - Electives
Semester: 
2018 Autumn
Active status: 
Active
Teaching language: 
English
Course type: 
One semester
Introduction

According to an estimate from the International Monetary Fund (IMF), between 1970 and 2011 alone the world experienced no less 147 systemic banking crises, 218 currency crises and 66 sovereign debt crises (Valencia & Laeven, 2012). 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 crisis and why do they appear so frequently? How does the macroeconomic climate affect the occurrence of financial crisis? Are financial crises more frequent today than before? How have existing crises been solved 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 student’s 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, starting with three classical bubbles from the seventeenth and eighteenth century (the Tulip mania, the Mississippi bubble and the South Sea bubble) and ending with the Euro crisis (2010-). The idea is that by investigating past experiences with financial crisis 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.

Learning outcomes - Knowledge

During the course students shall acquire:

  • Knowledge about fundamental concepts (such as money and debt), about financial institutions (such as banks and regulatory authorities) and about the larger macroeconomic environment in which the financial sector is situated.
  • A broad base of theoretical and empirical knowledge about financial stability and financial crises in a historical perspective.
  • In-debt knowledge about historical cases of financial crisis.
Learning outcomes - Skills

After completed course students should be able to:

  • Distinguish between different theories on the causes and effects of financial bubbles, crashes and crises, and to apply this knowledge for analytical purposes.
  • Critically and systematically discuss divergent theories on financial crisis and to present their analysis in writing.
  • Analyze present-day problems in a historical perspective.
Learning Outcome - Reflection

After completed course students should be able to:

  • Reflect on the value of historical knowledge for the understanding of present day problems.
  • 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 various ethical dilemmas connected to the development of financial crises and the different ways of solving them.
Course content

The course will be divided in a theoretical and a more empirical, or historical, part.  

The theoretical part will;

  • Present a number of basic concepts and issues necessary to understand the development of financial crisis.
  • Describe the most important institutions within the financial sector and how international finance has developed over time.
  • Discuss a number of existing theories of financial crises including the so-called Minsky-Kindleberger model and the Monetarist school on crisis development.

The empirical, or historical, part will present a number of historical case studies of financial crises, including;

  • The Tulip mania (1636-37), the Mississippi bubble (1716-21) and the South Sea bubble (1711-1721),
  • The Wall Street crash, the Great Depression and the crises of the 1930s,
  • The Nordic banking crisis of the 1990s,
  • The Asian crisis (1997/98),
  • The Subprime crisis (2008) and
  • The Euro crisis (2010-).
Learning process and requirements to students

The course consists of lectures, group work, discussions and presentations.

Software tools
No specified computer-based tools are required.
Additional information

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.

Qualifications

Higher Education Entrance Qualification.

Required prerequisite knowledge

No specific prerequisites required.

Exam categoryWeightInvigilationDurationSupport materialsGroupingComment exam
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
ELE37321
Grading scale:
ECTS
Grading rules:
Internal and external examiner
Resit:
Examination when next scheduled course
100Yes5 Hour(s)
  • Bilingual dictionary
Individual
Exams:
Exam category:Submission
Form of assessment:Written submission
Weight:100
Invigilation:Yes
Grouping (size):Individual
Support materials:
  • Bilingual dictionary
Duration:5 Hour(s)
Comment:
Exam code: ELE37321
Grading scale:ECTS
Resit:Examination when next scheduled course
Exam organisation: 
Ordinary examination
Total weight: 
100
Workload activityDurationType of durationComment student effort
Teaching36Hour(s)
Review of assignments in plenary8Hour(s)
Group work / Assignments25Hour(s) Casework and assignments
Prepare for teaching6Hour(s)Preparation for presentations
Self study120Hour(s)
Examination5Hour(s)
Expected student effort:
Workload activity:Teaching
Duration:36 Hour(s)
Comment:
Workload activity:Review of assignments in plenary
Duration:8 Hour(s)
Comment:
Workload activity:Group work / Assignments
Duration:25 Hour(s)
Comment: Casework and assignments
Workload activity:Prepare for teaching
Duration:6 Hour(s)
Comment:Preparation for presentations
Workload activity:Self study
Duration:120 Hour(s)
Comment:
Workload activity:Examination
Duration:5 Hour(s)
Comment:
Sum workload: 
200

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.

Talis literature

Obligatorisk/Compulsory

Book
Authors/Editors År Tittel Edition Publisher StudentNote
Mishkin, Frederic S. 2016 The economics of money, banking, and financial markets 11th ed., Global ed Pearson  
Aliber, Robert Z.; Kindleberger, Charles P. 2015 Manias, panics and crashes: a history of financial crises 7th ed Palgrave Macmillan  
Chapter
Authors/Editors År Tittel Journal Edition Publisher StudentNote
Klovland, J.T.   Bank Crises and resumption of Prewar Gold Parity, 1920-1928 Bank Crises and resumption of Prewar Gold Parity, 1920-1928      
Moseley, F.   Marx, Minsky and Crotty on crises in capitalism Marx, Minsky and Crotty on crises in capitalism      
Article
Authors/Editors År Tittel Edition Publisher StudentNote
Knutsen, Sverre 1991-09 From expansion to panic and crash      
Lönnborg, Mikael; Ögren, Anders; Rafferty, Michael 2011-04 Banks and Swedish financial crises in the 1920s and 1930s      
Hansen, Per H. 1991-09 From growth to crisis      
Document
Authors/Editors År Tittel Edition Publisher StudentNote
  2012 Why do banking crises occur? The American subprime crisis compared with the Norwegian banking crisis 1987-92   Norges Bank  

Anbefalt/Recommended

Book
Authors/Editors År Tittel Edition Publisher StudentNote
Jonung, Lars; Vartia, Pentti; Kiander, Jaakko cop. 2009 The Great financial crisis in Finland and Sweden: the Nordic experience of financial liberalization   Edward Elgar 241 pages
Reinhart, Carmen M.; Rogoff, Kenneth cop. 2009 This time is different: eight centuries of financial folly   Princeton University Press Page 1-292
Chapter
Authors/Editors År Tittel Journal Edition Publisher StudentNote
Sjögren, Hans; Knutsen, Sverre   Why do banking crises occur? : an evolutionary model of Swedish banking crises Why do banking crises occur? : an evolutionary model of Swedish banking crises     P. 183-203