Understanding Financial Crises

Author: Franklin Allen; Douglas Gale
Publisher: Oxford University Press
ISBN: 9780199251421
Published In: April 2009
Format: Paperback , 320 pages
Jurisdiction: International ? Disclaimer:
Countri(es) stated herein are used as reference only

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Written by two leading academics, Franklin Allen, former President of the American Finance Association, and Douglas Gale
Provides the reader with an overview of the history of financial crises and the main economic tools needed for decision making in financial crises
Aids readers' understanding by gradually increasing the level of sophistication used in each model

What causes a financial crisis? Can financial crises be anticipated or even avoided? What can be done to lessen their impact? Should governments and international institutions intervene? Or should financial crises be left to run their course? In the aftermath of the Asian financial crisis, many blamed international institutions, corruption, governments, and flawed macro and microeconomic policies not only for causing the crisis but also unnecessarily lengthening and deepening it.

Based on ten years of research, the authors develop a theoretical approach to analyzing financial crises. Beginning with a review of the history of financial crises and providing readers with the basic economic tools needed to understand the literature, the authors construct a series of increasingly sophisticated models. Throughout, the authors guide the reader through the existing theoretical and empirical literature while also building on their own theoretical approach. The text presents the modern theory of intermediation, introduces asset markets and the causes of asset price volatility, and discusses the interaction of banks and markets. The book also deals with more specialized topics, including optimal financial regulation, bubbles, and financial contagion.

Readership: Suitable for advanced undergraduates, graduates and academics; Policymakers and government officials; and bankers interested in understanding the latest economic theories on the causes and consequences of financial crises.

1: History and institutions
2: Time, uncertainty and liquidity
3: Intermediation
4: Asset markets
5: Financial fragility
6: Intermediation and markets
7: Optimal regulation
8: Money and the prices
9: Bubbles and crises
10: Contagion

Franklin Allen, Nippon Life Professor of Finance and Economics, The Wharton School of the University of Pennsylvania, and Douglas Gale, Julius Silver Professor of Economics, New York University & Fellow, Churchill College, Cambridge

Review(s) from previous edition

"Allen and Gale have been at the frontier of theoretical thinking about crises for over a decade ... a one-stop-shop for the many important contributions made to the theoretical modelling of financial crises by these two prominent authors - Central Banking Vol 18 No 1

"This is, for me, the book's real selling point: it is accessible to a graduate level audience - indeed, would make an excellent lecture series - but at the same time easily contains enough state-of-the-art modelling to be of interest to the academic or policymaker. " - Andrew G. Haldane