Economics 497
Finance and Financial Crises Readings

Many interesting additional readings are available on the web. By clicking on the appropriate paper you can download selected papers for this course. Some papers are in pdf format. To read them you need the Acrobat Reader, which can be downloaded for free by clicking here.
 

  • For current events you may want to read the Forex Blog or ForEx Street.
  • There is also a lot of good stuff at Econbrowser.
  • And to see information about exchange rates go to the New York Fed's Foreign Exchange Page.


    • Readings on Finance
  • Varian, Hal, "The Arbitrage Principle in Financial Economics," Journal of Economic Perspectives, Vol 1, 2, Autumn 1987: 55-72.
  • Miller, Merton, "The Modigliani-Miller Propositions After Thirty Years," Journal of Economic Perspectives, Volume 2, Number 4, Fall 1988: Pages 99-120
  • John Y. Campbell, "Asset Pricing at the Millennium,", Journal of Finance, August 2000.
  • Cochrane, John, "Financial Markets and the Real Economy," mimeo, 2006 (Web).
  • Cochrane, John, "New Facts in Finance," Economic Perspectives, Federal Reserve Bank of Chicago, 23 (3), 36-58, 1999. (Web).
  • Fama; Eugene F. Kenneth R. French, "The Capital Asset Pricing Model: Theory and Evidence," The Journal of Economic Perspectives, Vol. 18, No. 3, Summer, 2004: 25-46. (JSTOR).
  • Some inside dope on Fama and French.
  • Lamont, Owen A. and Richard H. Thaler, "The Law of One Price in Financial Markets," Journal of Economic Perspectives, Volume 17, 4, Fall 2003: 191--202. (JSTOR).
  • Here is an article by Andrei Shleifer and Robert Vishny on the Limits of Arbitrage.
  • An article by Barry Eichengreen and Donald Mathieson explores the role of hedge funds, and includes a discussion of LTCM.
  • This article about the 1988 crash is written by the creators of portfolio insurance. Leland, Hayne and Mark Rubinstein, "Comments on the Market Crash: Six Months After," The Journal of Economic Perspectives, Vol. 2, No. 3. (Summer, 1988), pp. 45-50.
  • Rubinstein, Mark, "Derivative Assets Analysis," The Journal of Economic Perspectives, Vol. 1, No. 2. (Autumn, 1987), pp. 73-93.
  • The Economist has an interesting survey on Executive Pay. This touches on interesting questions of incentives and options.


    • Some Recent Articles on Financial and Currency Crises
     
  • Roubini, Nouriel and Brad Setser, Bailouts or Bail-ins? Responding to Financial Crises in Emerging Markets, Chapter 2, New Nature of Emerging-Market Crises, Aug 2004.
  • Pesenti, Paolo, and Cedric Tille, "The Economics of Currency Crises and Contagion: An Introduction," Economic Policy Review, 6, 3, September 2000.
  • Chiodo, Abbigail J and Michael T. Owyang, "A Case Study of a Currency Crisis: The Russian Default of 1998," Federal Reserve Bank of St. Louis Review, November/December 2002, 84(6), pp. 7-17.
  • Ken Rogoff asks "Who Needs the IMF?"
  • Paul Krugman discusses how "How Washington worsened Asia's crash."
  • A conference volume from the NBER focuses on  Preventing Currency Crises in Emerging Economies.
  • An article by Brad DeLong on The International Financial Crises of the 1990s: Analytics.
  • Anne Krueger's important new proposal on Sovereign Debt Restructuring.
  • George Akerlof and Paul Romer wrote about Looting: The Economic Underworld of Bankruptcy for Profit.


    • Credit Markets and Risk
  • The Federal Reserve recently held a conference on Credit Risk and Credit Derivatives. There are several interesting papers available here.
  • The remarks by Federal Reserve Vice Chair Donald Kohn at the Conference are worth reading.
  • James Hamilton has some interesting remarks on credit risk at his blog, Econbrowser.
  • Here is a recent Economist article on the subprime problem.


    • Recent Articles on Asset Markets and Bubbles
  • The most recent World Economic Outlook from the IMF has a chapter on what happens when bubbles burst.
  • The IMF's Global Financial Report has a chapter on asset price volatility. The appendix describes the circumstances that surround the bubble in Japan and the collapse of LTCM.
  • Here is an article that discusses whether Alan Greenspan contributed to "irrational exuberance," and whether this is bad monetary policy. It is titled the "Economic Consequences of Mr. Greenspan."
  • Asset prices, such as exchange rates, are often subject to what economists call "Peso Problems." Here is an article that explains this phenomenon and how it impact on some puzzles in international finance, such as the forward premium puzzle.
  • Peter Garber writes about Famous First Bubbles.
  • Here is an article by Michael Lewis that looks at the internet bubble, entitled In Defense of the Boom (NYTimes registration required).
  • A symposium on bubbles in asset prices (includes the Garber article and others).


    • Articles on Argentina
  • The IMF has produced a new report on its role in Argentina.
  • Here is a good article that provides background and analysis and asks Why Was Argentina Special and What Can We Learn From it?
  • Michael Mussa, former Chief Economist at the IMF discusses Argentina and the Fund: From Triumph to Tragedy.
  • A report by World Bank Economists studies the link between the currency board and the financial system in Argentina, and its role in the collapse.
  • Kurt Shuler argues that implementing a real currency board is the solution for Argentina.
  • Here is an article that considers dollarization in Argentina.
  • Kurt Shuler criticizes other economists for their advice to Argentina."


    • Selected Literature on Currency Crises
  • Nouriel Roubini's Asia Crisis Homepage. This is the best source of information on the web. It has hundreds of papers, and links to sites all over the web.
  • A special issue of the Economic Policy Review at the New York Fed examines "Lessons from Recent Crises in Asia and Other Emerging Markets."
  • An article by Ahearne, Fernald, and Loungani, discusses why China did not Succumb to Contagion.
  • An article by George Kaufman on Banking and "Currency Crisis and Systemic Risk: Lesson from Recent Events." This article reviews recent experience on the relationship between banking and currency crises.
  • Craig Burnside, Martin Eichenbaum and Sergio Rebelo emphasize the role of fiscal policy in generating the Korean and Thai Currency Crises.
  • International Institutions for Reducing Global Financial Instability  by Ken Rogoff.
  • Stanley Fischer, Deputy Managing Director of the International Monetary Fund, recently addressed the American Economics Association. His paper is titled, On the Need for an International Lender of Last Resort.
  • "The Asian Model, the Miracle, the Crisis and the Fund" by Jeffrey A. Frankel.
  • What Happened to Asia? by Paul Krugman.
  • Latin America's Swan Song, by Paul Krugman.
  • The Confidence Game: How Washington Worsened Asia's crash, by Paul Krugman.
  • The New York Times Series on Global Contagion (registration required):

    •     - Who Sank, or Swam, in Choppy Currents of a World Cash Ocean
        - How U.S. Wooed Asia to Let Cash Flow In
        - World's Markets, None of Them an Island
        - The World's Ills May Be Obvious, but Their Cure Is Not
  • The Asian Financial Crisis What Have We Learned? by Timothy Lane.
  • The Onset of the East Asian Financial Crisis, by Steve Radelet and Jeffrey Sachs. This paper contains the typology of crises table that was presented in class. See figure 1 in the paper. You need to be logged on to a psu account to access this paper.
  • Here is an article by David Marshall which explains how a crisis like the Russian default can trigger a global liquidity crisis. The puzzle is why a problem associated with emerging market debt was resolved by the Fed cutting interest rates.

  • Information on what has happened in Asia, Brazil and Russia, along with links to many other sites, are available at the following Yahoo pages. In addition, there is a Yahoo page on the Euro.

    •     -Yahoo's Asian Economy Page.
        -Yahoo's Brazil's Currency Crisis Page.
        -Yahoo's Russia Crisis Page.
        -Yahoo's Euro Page.

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    This page was prepared by Barry W. Ickes
    Last updated: January 16, 2007
    bwickes@psu.edu
    http://www.personal.psu.edu/i04/index.htm