Franklin allen is a professor of finance in the department of finance, wharton school. The basel accords promote the adoption of capital adequacy requirements to increase the banking sectors stability. Financial innovation and risk sharing mit press the mit press allen, franklin, gale, douglas on. Financial innovation and risk sharing mit press the mit press. Franklin allen and douglas gale comparing financial systems. Franklin allen and douglas gale clarendon lectures in finance. Liquidity pools, risk sharing, and financial contagion springerlink. Because liquidity preference shocks are imperfectly correlated across regions, banks hold interregional claims on other banks to provide insurance against liquidity preference shocks.
Financial network structure is an important determinant of systemic risk. Competition and financial stability wharton finance university of. Information acquisition and financial contagion request pdf. In this book they assemble some of their key papers along with a fivechapter overview that not only synthesizes their work but provides a. Motivation as history shows, financial crises often follow the burst of an asset price bubble e. Franklin allen and douglas gale levines working paper archive from david k. An introduction to financial crises franklin allen. The work may be applied to describe the 1997 east asian crisis and the banking meltdowns which took place in the u. 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. Volume 108, number 1 february 2000 selectdeselect all. Financial contagion is modeled as an equilibrium phenomenon. View citations in econpapers track citations by rss feed. Financial fragility, liquidity, and asset prices journal. N2 financial contagion is modeled as an equilibrium phenomenon.
Furthermore, we also provide a claim structure called liquidity pool that can both achieve risk sharing and prevent financial contagion across regions. Different theoretical models are developed in the literature e. Request pdf financial contagion financial contagion is modeled as an. This paper reevaluates the allengale 2000 analysis of interbank deposits to explain financial contagion. The other references constitute additional basic literature on each topic. Financial crises in historical perspective economics 210b barry eichengreen spring 2009 department of economics. Course on financial crises european university institute. Paper presented at the macroeconomic and policy challenges following financial meltdowns conference, international monetary fund. This paper modifies the pecking order of asset liquidation developed in allengale, which is essential in fragility analysis. Allen and gale 2000, and lagunoff and sct 2001 analyze financial contagion as a result of linkages among financial. Financial contagion and systemic risk of global financial system. View references in econpapers view complete reference list from citec citations. For full access to this pdf, sign in to an existing account, or purchase an annual subscription. Financial crisis and credit crunch as a result of inefficient financial intermediationwith reference to the asian financial crisis, international finance.
Innovations in financial services relationships and risk sharing, working paper, may 1. Read the fulltext online edition of understanding financial crises 2007. Download book pdf international financial contagion pp 6795 cite as. Allen and gale 2000a, reprinted here as reading 14 provide a theory of. Franklin allen is a professor offinance in the department of finance, wharton school, university of pennsylvania. Financial links come from financial globalization since countries try to be more economically integrated with global financial markets.
Financial fragility bank for international settlements. This paper introduces banking regulation in an overlappinggenerations model and studies how. Financial liberalization, by expanding the volume of credit and creating uncertainty about the. View citations in econpapers 496 track citations by rss feed downloads. Financial crises, and this led to further studies on the welfare economics of. View enhanced pdf access article on wiley online library html view. The welfare cost of banking regulation munich personal. The material denoted with in the list below will be discussed in class. Allen and gale 2000b developed a model of contagion with a. Financial contagion franklin allen douglas gale jstor. 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.
Federal reserve board interconnectedness and systemic. 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. Financial contagion, journal of political economy 108. Allen and gale 2000 define contagion as a consequence of excess spillover. Readings economic crises economics mit opencourseware.
Sequential voting procedures in symmetric binary elections. Additional references may be provided during the course. Understanding financial crises franklin allen, douglas. Financial innovation and risk sharing mit press the mit. For example, financial markets may be bad for risk sharing. Franklin allen, douglas gale, financial fragility, liquidity, and asset prices.
Currency crises and monetary policy with credit constraints. Maybe less interesting to practitioners, although there are some good insights even there. Gale, financial contagion, journal of political economy, vol. The founding of the federal reserve, the great depression. Written by two leading academics, franklin allen, former president of the american finance association, and douglas gale. Mario eboli, a flow network analysis of direct balancesheet contagion in financial networks, journal of economic dynamics and control, 10. Because liquidity preference shocks are imperfectly correlated across regions, banks hold interregional claims on other banks to. Comparing financial systems the mit press allen, franklin, gale, douglas on. Financial crises by franklin allen and douglas gale. The case for incentivesbased financial sector reforms. Your use of the jstor archive indicates your acceptance of. 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. World bank, financial sector strategy and policy department, washington, d. This is a nice book if youre looking for a coherent overview of theoretical models of financial crises.
In 2000, franklin allen and douglas gale, for example, developed. Franklin allen and douglas gale 2007, understanding. Vishny 1992 and allen and gale 1998 for a discussion of the costs of. Optimal financial crises, center for financial institutions working papers 9701, wharton school center for financial institutions, university of pennsylvania. Provides the reader with an overview of the history of financial crises and the main economic tools needed for decision making in financial crises. Franklin allen and douglas gale argue that the view that marketbased systems are best is simplistic. Financial contagion franklin allen university of pennsylvania douglas gale new york university financial contagion is modeled as an equilibrium phenomenon. Competition and financial stability wharton finance. Optimal financial crises allen 1998 the journal of. Financial contagion, journal of political economy, 108. Liquidity pools, risk sharing, and financial contagion.
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