Towards A Typology For Systemic Financial Instability
AbstractThis article seeks to provide a categorisation of events of systemic financial instability that have been experienced in recent decades, seeking to draw out common elements from these seemingly-diverse events. We maintain that despite the apparent diversity of events of financial instability, a useful summary categorisation is between bank, market-price and market-liquidity based crises. There are important subcategories of each type, such as domestic versus international, currency crisis linked, single-institution based, equity-related, property, commodities, deregulation and disintermediation linked crises. Such financial crises are usefully examined in the light of the theories of financial instability, not least to illuminate common generic patterns that can be helpful in macroprudential surveillance. We derive a framework for analysing the evolution of such crises, highlighting that it is vulnerability of a financial system that is the key common element to a crisis, besides the nature of propagation of a crisis to the wider economy. Besides having general applicability, notably to OECD countries, the typology and generic features have some relevant implications for euro area countries. Development of securities markets, the likelihood of regional crises and the likely impact of ageing are among aspects that warrant vigilance by policy makers in the euro zone.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 03-20.
Length: 23 pages
Date of creation: Nov 2003
Date of revision:
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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- E Philip Davis, 2003. "Towards A Typology For Systemic Financial Instability," Public Policy Discussion Papers 03-20, Economics and Finance Section, School of Social Sciences, Brunel University.
- NEP-ALL-2004-07-18 (All new papers)
- NEP-FMK-2004-07-18 (Financial Markets)
- NEP-PKE-2004-07-18 (Post Keynesian Economics)
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