Explaining Financial Crises : : A Cyclical Approach.

Explaining Financial Crises : : A Cyclical Approach.

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Bibliographic Details
Superior document:Hohenheimer Volkswirtschaftliche Schriften Series ; v.53
:
Hagemann, Harald.
TeilnehmendeR:
Radke, Marc Peter.
Place / Publishing House:Frankfurt a.M. : : Peter Lang GmbH, Internationaler Verlag der Wissenschaften,, 2005.
Ã2005.
Year of Publication:2005
Edition:1st ed.
Language:English
Series:Hohenheimer Volkswirtschaftliche Schriften Series
Online Access:
Physical Description:1 online resource (438 pages)
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Table of Contents:
  • Cover
  • Preface
  • List of Figures
  • List of Tables
  • 1 Introduction and Overview
  • 1.1 History vs. Theory
  • 1.2 Outline of the Book
  • I Theoretical and Empirical Foundations
  • 2 Financial Crises and Financial Instability: Definitions and Principles
  • 2.1 A General Definition of Financial Crises
  • 2.2 Asset Price Fluctuations and Aggregate Economic Activity
  • 2.2.1 Determinants of Asset Prices
  • 2.2.2 Asset Prices and Financial Constraints
  • 2.2.2.1 Perfect Capital Market Theory
  • 2.2.2.2 Imperfect Capital Market Theory
  • 2.2.2.3 A Comparison with Real World Financial Constraints
  • 2.2.3 Asset Prices and Aggregate Demand
  • 2.2.4 Asset Prices, Liquidity, Solvency and the Emergence of Cumulative Processes
  • 2.2.4.1 Liquidity, Solvency, and Profits: Definitions and Interdependencies
  • 2.2.4.2 Determinants of Bankruptcy
  • 2.2.4.3 Cumulative Expansions and Contractions
  • 2.3 Determinants of Financial Instability
  • 2.3.1 A General Definition of Financial Instability
  • 2.3.2 Cash Flow Positions and Present Values
  • 2.3.2.1 Hedge, Speculative and Ponzi-Finance
  • 2.3.2.2 Financial Instability in Closed Economies
  • 2.3.2.3 Foreign Hedge, Foreign Speculative, and Foreign Ponzi Finance
  • 2.3.2.4 Financial Instability in Open Economies
  • 2.3.3 Adequacy of Refinancing Possibilities
  • 2.3.4 Excess Volatility in Asset Prices
  • 2.3.5 Monetary Instability and Debt Deflation
  • 2.4 Exogenous and Endogenous Financial Crises
  • 3 Stylized Facts and Standard Theory of Financial Crises
  • 3.1 Defining and Identifying Financial Crises
  • 3.1.1 Currency Crises
  • 3.1.2 Banking Crises
  • 3.1.3 Twin Crises
  • 3.2 Frequency and Severity of Financial Crises
  • 3.2.1 Incidence of Financial Crises
  • 3.2.2 Duration and Costs of Financial Crises
  • 3.3 Business Cycles, Financial Liberalization, and Financial Crises
  • 3.3.1 Basic Links.
  • 3.3.2 Financial Liberalization in the Post Bretton Woods Era
  • 3.4 Stylized Behaviour of Macroeconomic Variables During Episodes of Financial Crises
  • 3.4.1 Financial Market Variables
  • 3.4.1.1 Monetary Aggregates and Foreign Exchange Reserves
  • 3.4.1.2 Deposits and Domestic Credit
  • 3.4.1.3 Interest Rates
  • 3.4.1.4 Equity and Real Estate Prices
  • 3.4.2 Current Account Variables
  • 3.4.3 Capital Account Variables
  • 3.4.4 Real Sector Variables
  • 3.4.5 Balance Sheet Variables
  • 3.4.5.1 Liquidity and Profit Variables
  • 3.4.5.2 Market Valuation and Solvency Variables
  • 3.4.6 An Assessment
  • 3.5 Standard Theory of Financial Crises and its Correspondence with the Stylized Facts
  • 3.5.1 Inconsistent Macroeconomic Policy Models
  • 3.5.2 Self-Fulfilling Expectations Models
  • 3.5.3 Asymmetric Information Models
  • 3.5.4 Credit Constraint and Balance Sheet Models
  • 3.5.5 Endogenous Financial Crisis Models
  • 3.5.6 An Assessment
  • II A Cyclical Theory of Financial Crises
  • 4 A Model of Financial Crises and Endogenous Fluctuations in Industrial Countries
  • 4.1 The Real Side
  • 4.2 The Financial Side
  • 4.2.1 A Stylized Financial Structure
  • 4.2.2 Financial Market Equilibria
  • 4.3 Short-Run Comparative-Static Analysis
  • 4.3.1 General Results
  • 4.3.2 A Comparative-Static View of Financial Crises
  • 4.4 Long-Run Dynamic Analysis
  • 4.4.1 Finance, Investment and Long-Run Profit Expectations
  • 4.4.2 The Local Dynamics of the System
  • 4.4.3 Phase Diagram Analysis
  • 4.4.4 The Global Dynamics of the System
  • 4.4.5 A Dynamic View of Financial Crises and Macroeconomic Fluctuations
  • 4.4.5.1 The Emergence of Endogenous Long-Run Equilibrium Business Cycles
  • 4.4.5.2 The Emergence of Financial Crises
  • 4.4.6 A Keynesian Perspective on Global Dynamics
  • 4.5 A Comparison with Standard Theory of Financial Crises.
  • 4.5.1 Inconsistent Macroeconomic Policy Models
  • 4.5.2 Self-Fulfilling Expectations Models
  • 4.5.3 Asymmetric Information Models
  • 4.5.4 Credit Constraint and Balance Sheet Models
  • 4.5.5 Endogenous Financial Crisis Models
  • 4.5.6 An Assessment
  • 4.6 A Comparison with Standard Business Cycle Theory
  • 4.6.1 Theories of Endogenous Business Cycles
  • 4.6.2 Theories of Exogenous Shock-Driven Business Cycles
  • 4.6.3 An Assessment
  • 4.7 Mathematical Supplements
  • 5 A Model of Financial Crises and Endogenous Fluctuations in Emerging Market Countries
  • 5.1 The Real Side
  • 5.2 The Financial Side
  • 5.2.1 A Stylized Financial Structure
  • 5.2.2 Financial Market Equilibria
  • 5.3 Short-Run Comparative-Static Analysis
  • 5.3.1 General Results
  • 5.3.2 A Comparative-Static View of Financial Crises
  • 5.4 Long-Run Dynamic Analysis
  • 5.4.1 Finance, Investment and Long-Run Profit Expectations
  • 5.4.2 The Local Dynamics of the System
  • 5.4.3 Phase Diagram Analysis
  • 5.4.4 The Global Dynamics of the System
  • 5.4.5 A Dynamic View of Financial Crises and Macroeconomic Fluctuations
  • 5.4.5.1 The Emergence of Endogenous Long-Run Equilibrium Business Cycles
  • 5.4.5.2 Domestic Financial Crisis without Currency Crisis
  • 5.4.5.3 The Occurrence of a Twin Crisis
  • 5.4.6 A Keynesian Perspective on Global Dynamics
  • 5.5 A Comparison with Standard Theory of Financial Crises
  • 5.5.1 Inconsistent Macroeconomic Policy Models
  • 5.5.2 Self-Fulfilling Expectations Models
  • 5.5.3 Asymmetric Information Models
  • 5.5.4 Credit Constraint and Balance Sheet Models
  • 5.5.5 Endogenous Financial Crisis Models
  • 5.5.6 An Assessment
  • 5.6 A Comparison with Standard Business Cycle Theory
  • 5.7 Mathematical Supplements
  • 6 A Calibration Model of Financial Crises in Emerging Markets
  • 6.1 The Nature of Calibration Models.
  • 6.1.1 Solution Procedures to Dynamic General Function Models, Limitations, and Simulation Methods
  • 6.1.2 Simulation of Financial Crises with Calibration Techniques
  • 6.2 The Real Side
  • 6.3 The Financial Side
  • 6.3.1 A Stylized Financial Structure
  • 6.3.2 Financial Market Equilibria
  • 6.4 The Balance of Payments
  • 6.5 Monetary and Exchange Rate Policy
  • 6.6 Analytical Solution of the Model
  • 6.7 Simulation Classifications and Assumptions
  • 6.7.1 Financial Crises as a Cyclical Phenomenon
  • 6.7.2 Financial Crises as an Adverse Exogenous Shock Phenomenon
  • 6.8 Sensitivity Analysis and Method of Graphical Representation
  • 6.9 Simulation of Financial Crises as a Cyclical Phenomenon
  • 6.9.1 The Boom Phase
  • 6.9.2 The Overborrowing Phase and the Upper Turning Point
  • 6.9.3 The Bust Phase
  • 6.10 Simulation of Financial Crises Caused by an Adverse Foreign Interest Rate Shock
  • 7 Conclusion
  • 7.1 New Perspectives for Economic Theory
  • 7.2 Policy Recommendations
  • A Tobin's q-Theory of Investment
  • B Financial Constraints in Perfect Capital Markets
  • C An Example of Off-Balance Sheet Transactions
  • D Forward vs. Backward Looking Variables and Solutions of General Dynamic Rational Expectations Models
  • D.1 Forward and Backward Solutions of Linear Differential Equations
  • D.2 The Leibnitz Rule: Differentiating a Definite Integral
  • D.3 Backward and Forward Looking Variables
  • D.4 Forward Looking Variables, Rational Expectations and Dynamic Stability
  • D.5 Solutions to General Dynamic Rational Expectations Models
  • E Kalecki's Theory of Profits
  • Symbol Glossary
  • Bibliography.

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