Economics 567

Financial Crises, Market Crashes, and Economic Depressions

Summer 2011

Jeffrey Parker

Course Outline and Reading List


Part I: Basic Principles and Historical Background

1. Introduction to Economics

A very basic toolkit of economic concepts.

June 13 and 14

  • Dasgupta, Partha, Economics: A Very Short Introduction, Oxford University Press, 2007, Chapters 1 through 6. (Copies should be available in Reed Bookstore.) This is a layperson's introduction to economics that attempts to be totally narrative rather than analytical. We will work through the concepts introduced in the book during the first few days of the class. It should be very easy reading for all, but lacks the graphs and simple equations that are typical in a formal introductory economics course. If you crave the latter, read from the next reading...
  • Optional additional reading: Mankiw, N. Gregory, Principles of Macroeconomics, 5th ed., Cengage Learning, 2008, Chapters 1 through 4 (and, if they pique your interest, 5 through 9). This is a more analytical (but still very simple) treatment of introductory economics concepts. (Six copies are available in Reed Library. Because this is likely enough for everyone, I have not put them on reserve.) 

2. Banking and Financial Markets

Basic concepts and terminology of banking, credit, and financial markets, and their implications for macroeconomic performance.

June 15-21

3. Financial Crises: Basics and Historical Overview

Some basics and historical discussion of financial crises and their origins.

June 22-30

  • Kindleberger, Charles P., and Robert Aliber, Manias, Panics, and Crashes: A History of Financial Crises, 5th edition, Wiley, 2005. Chapters 1-5, 8-11. We will study most of this book, though all students will not be asked to read every chapter. (Two copies are available in the Reed Library on reserve. I've asked the Reed Bookstore to obtain a few copies as well.)
  • Reinhart, Carmen S., and Kenneth S. Rogoff, This Time is Different: Eight Centuries of Financial Follies, Princeton University Press, 2009, Chapters 1, 2, 4-8, 10-12. (One copy is currently on reserve and a second one has been requested and should arrive before we read it. I've asked the bookstore to obtain a few copies as well if you would like your own copy.) 

Part II: Detailed Analysis of Historical Episodes

4. The Great Depression and Earlier U.S. Crises

July 5-7

  • Federal Reserve Bank of Boston, "Panic of 1907," undated.
  • Strouse, Jean, "The Brilliant Bailout," The New Yorker, November 23, 1998, 62-77.
  • Jalil, Andrew, "A New History of Banking Panics in the United States, 1825-1929: Construction and Implications," Unpublished manuscript.
  • Friedman, Milton, and Anna Schwartz, A Monetary History of the United States, 1867-1960, Princeton, N.J.: Princeton University Press, 1963, Chapter 7: The Great Contraction, 1929-33. (This chapter is 121 pages long and has been published separately as a book called The Great Contraction. Although there is a lot of detail that is relatively unimportant, there are no sections that can be omitted completely. Extract as much as you can of F&S's interpretation of the events and the Fed's policy response during each of the sub-periods they analyze. Skim past the gory minutia about month-to-month changes in monetary stocks.)
  • Bernanke, Ben, "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review 73(3), June 1983, 257-276.
  • Calomiris, Charles W., and Joseph R. Mason, "Contagion and Bank Failures During the Great Depression," American Economic Review 87(5), December 1997, 863-883.
  • Temin, Peter, Lessons from the Great Depression, Cambridge, Mass.: MIT Press, 1989 (Lionel Robbins Lectures), Lectures 1 and 2.

5. Crises of the 1980s and 1990s

July 11-13

U.S. Banks and the Third-World Debt Crisis

Savings and Loan Crisis of the 1980s

Japan in the 1990s

Asian Financial Crisis

  • Corsetti, Giancarlo, Paolo Pesenti, and Nouriel Roubini, "What Caused the Asian Currency and Financial Crisis?" Japan and the World Economy 11 (3), 1999, 305-73. (We do not have electronic access to this journal, so these links take you to the NBER Working Paper version, which is split into Part I and Part II.)
  • Radelet, Steven, and Jeffrey D. Sachs, "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, 1998 (1), 1-74.

Mexican Currency Crisis

  • Whitt, Joseph A., Jr., "The Mexican Peso Crisis," Federal Reserve Bank of Atlanta Economic Review 81 (1), 1996, 1-20.

    6. The Financial Crisis of 2006-08 and Europe's Current Sovereign Debt Problems

    July 14-19