Mario eboli, a flow network analysis of direct balancesheet contagion in financial networks, journal of economic dynamics and control, 10. The material denoted with in the list below will be discussed in class. Franklin allen and douglas gale comparing financial systems. Financial liberalization, by expanding the volume of credit and creating uncertainty about the. Financial fragility, liquidity, and asset prices journal. Financial contagion is modeled as an equilibrium phenomenon.
Liquidity pools, risk sharing, and financial contagion springerlink. Sequential voting procedures in symmetric binary elections. The other references constitute additional basic literature on each topic. Request pdf financial contagion financial contagion is modeled as an. For full access to this pdf, sign in to an existing account, or purchase an annual subscription. Volume 108, number 1 february 2000 selectdeselect all. Franklin allen and douglas gale have contributed substantially to the study of financial innovation, developing economic models to address the question of whether the market provides institutions and opportunities for individuals to share risks efficiently. Written by two leading academics, franklin allen, former president of the american finance association, and douglas gale. View citations in econpapers 496 track citations by rss feed downloads. Financial innovation and risk sharing mit press the mit press allen, franklin, gale, douglas on. Optimal financial crises, center for financial institutions working papers 9701, wharton school center for financial institutions, university of pennsylvania. Understanding financial crises by franklin allen, douglas. The welfare cost of banking regulation munich personal.
An introduction to financial crises franklin allen. N2 financial contagion is modeled as an equilibrium phenomenon. Franklin allen is a professor offinance in the department of finance, wharton school, university of pennsylvania. Information acquisition and financial contagion request pdf.
Comparing financial systems the mit press allen, franklin, gale, douglas on. View citations in econpapers track citations by rss feed. Financial crises, and this led to further studies on the welfare economics of. Download book pdf international financial contagion pp 6795 cite as. Understanding financial crises franklin allen, douglas. Allen and gale 2000, and lagunoff and sct 2001 analyze financial contagion as a result of linkages among financial. Different theoretical models are developed in the literature e.
Franklin allen and douglas gale argue that the view that marketbased systems are best is simplistic. View references in econpapers view complete reference list from citec citations. Motivation as history shows, financial crises often follow the burst of an asset price bubble e. A search of economics research focusing on systemic risk or interconnectedness since 2007 yields 624 publications, twice as many as were produced in the previous 25 years. World bank, financial sector strategy and policy department, washington, d. Your use of the jstor archive indicates your acceptance of. This paper introduces banking regulation in an overlappinggenerations model and studies how. Financial contagion, journal of political economy, 108. Allen and gale 2000 define contagion as a consequence of excess spillover. Allen and gale 2000b developed a model of contagion with a. Professor of finance and economics, imperial college london. Furthermore, we also provide a claim structure called liquidity pool that can both achieve risk sharing and prevent financial contagion across regions.
Gale, financial contagion, journal of political economy, vol. The transmission channels between financial sector and real economy in light of the current financial crisis a critical survey of the literature. Financial innovation and risk sharing mit press the mit. In this book they assemble some of their key papers along with a fivechapter overview that not only synthesizes their work but provides a. For example, financial markets may be bad for risk sharing.
This paper modifies the pecking order of asset liquidation developed in allengale, which is essential in fragility analysis. Allen and gale 2000a, reprinted here as reading 14 provide a theory of. This paper reevaluates the allengale 2000 analysis of interbank deposits to explain financial contagion. Allen and gale apply risk shifting and asset substitution which. Readings economic crises economics mit opencourseware. Vishny 1992 and allen and gale 1998 for a discussion of the costs of. Because liquidity preference shocks are imperfectly correlated across regions, banks hold interregional claims on other banks to. When there is no aggregate uncertainty, the firstbest allocation of risk sharing can be achieved. The founding of the federal reserve, the great depression. Financial network structure is an important determinant of systemic risk. Provides the reader with an overview of the history of financial crises and the main economic tools needed for decision making in financial crises. Financial contagion franklin allen university of pennsylvania douglas gale new york university financial contagion is modeled as an equilibrium phenomenon. Currency crises and monetary policy with credit constraints.
Financial contagion, journal of political economy 108. Financial innovation and risk sharing mit press the mit press. Strengthening financial systems in developing countries. Unfortunately, this type of regulation can hamper economic growth by shifting banks portfolios from more productive risky investment projects toward less productive but safer projects. Financial crises by franklin allen and douglas gale, the. Financial intermediation, risk sharing, financial contagion. The contagion has traversed from the financial to the real sector, from the united states to the whole of. Franklin allen and douglas gale 2007, understanding. Financial crisis 6,912 words exact match in snippet view article find links to article franklin allen and douglas gale 2000, financial contagion, journal of political economy 108 1, pp. Financial fragility bank for international settlements.
Financial crises by franklin allen and douglas gale. This is a nice book if youre looking for a coherent overview of theoretical models of financial crises. Course on financial crises european university institute. Franklin allen, douglas gale, financial fragility, liquidity, and asset prices. Additional references may be provided during the course. Financial contagion franklin allen douglas gale jstor. Federal reserve board interconnectedness and systemic. Competition and financial stability wharton finance university of. Financial crisis and credit crunch as a result of inefficient financial intermediationwith reference to the asian financial crisis, international finance.
Competition and financial stability wharton finance. View enhanced pdf access article on wiley online library html view. Paper presented at the macroeconomic and policy challenges following financial meltdowns conference, international monetary fund. Financial links come from financial globalization since countries try to be more economically integrated with global financial markets. The basel accords promote the adoption of capital adequacy requirements to increase the banking sectors stability. The case for incentivesbased financial sector reforms. Financial crises in historical perspective economics 210b barry eichengreen spring 2009 department of economics. Liquidity pools, risk sharing, and financial contagion. The work may be applied to describe the 1997 east asian crisis and the banking meltdowns which took place in the u.
454 654 714 250 581 353 642 1105 332 1050 331 297 495 469 846 414 407 767 76 38 487 246 764 1366 332 909 1324 518 66 1428 720 1385 1170 664 1348 433 362 88 601 641 328 142 433 530