Discussionof Nordic FinancialCrises Lecture18
Institutional Clash and Financial Fragility. An Evolutionary Model of Banking Crises Sverre Knutsen* and Hans Sjögren** * Department of Innovation and Economic Organization, Norwegian School of Management **Department of Management and Engineering, Linköping University and EHFF, Stockholm School of Economics
Theories on FinancialCrises • Business cycleschool • Monetaristschool • Irving Fisher • Kindleberger & Minsky • Market psychology, Shiller
Conceptualframework • Institutional clash • Financial fragility • Financial distress • Systemic risk • Banking crisis • Lender of last resort
A Model for the Evolution of Banking Crises Step 1. Optimism and demandStep 2. Financial muscleStep 3. New rules and GeneralStep 4. Idle capitalStep 5. Debt StructureStep 6. The bubble burstsStep 7. Structural Change
Empiricalanalysis • Sweden - Period I • Norway – Period II • Finland – Period III
Conclusion • Resultsof the comparison • New insights in relation totheory? • What is useful for your essay?