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Modelling Financial Instability

Author

Listed:
  • Franklin Allen

    (Wharton School, University of Pennsylvania, allenf@wharton.upenn.edu)

Abstract

Financial instability can have large adverse effects on an economy. One major cause of instability is asset price bubbles. This paper starts by considering how such bubbles can arise due to the expansion of money and credit. The ways in which subsequent financial instability occurs are then discussed. Banking crises can arise due to panics or as a result of the business cycle. Contagion and financial fragility can cause small disturbances to have large effects. Finally, policy issues are touched upon.

Suggested Citation

  • Franklin Allen, 2005. "Modelling Financial Instability," National Institute Economic Review, National Institute of Economic and Social Research, vol. 192(1), pages 57-67, April.
    • Handle: RePEc:sae:niesru:v:192:y:2005:i:1:p:57-67
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    File URL: http://ner.sagepub.com/content/192/1/57.abstract
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    Citations

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    Cited by:

    1. repec:zbw:bofrdp:2007_015 is not listed on IDEAS
    2. Lerbs, Oliver & Voigtländer, Michael, 2018. "Ist eine makroprudenzielle Regulierung des deutschen Hypothekenmarktes geboten?," ZEW Discussion Papers 17-029, ZEW - Leibniz Centre for European Economic Research, revised 2018.
    3. David Zimmer, 2015. "Asymmetric dependence in house prices: evidence from USA and international data," Empirical Economics, Springer, vol. 49(1), pages 161-183, August.
    4. Pesola, Jarmo, 2007. "Financial fragility, macroeconomic shocks and banks' loan losses: evidence from Europe," Bank of Finland Research Discussion Papers 15/2007, Bank of Finland.
    5. Pesola, Jarmo, 2007. "Financial fragility, macroeconomic shocks and banks' loan losses : evidence from Europe," Research Discussion Papers 15/2007, Bank of Finland.
    6. Essid, Zina & Boujelbene, Younes & Plihon, Dominique, 2014. "Institutional quality and bank instability: cross-countries evidence in emerging countries," MPRA Paper 56251, University Library of Munich, Germany.
    7. Janos Kalman, 2023. "The Concept of Financial Stability in Theory and Law," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 22(2), pages 54-76.

    More about this item

    Keywords

    Bubbles; crises; contagion; fragility;
    All these keywords.

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