Financial Stability and Financial Crises

Bachelor 2022/2023

Type: Elective course (Economics and Statistics)

Area of studies: Economics

Delivered by: Department of Theoretical Economics

Where: Faculty of Economic Sciences

When: 4 year, 3 module

Mode of studies: offline

Open to: students of one campus

Instructors: Maria Shchepeleva

Language: English

ECTS credits: 3

Contact hours: 10

Full Syllabus

Abstract

This course provides a comprehensive overview of financial stability analysis as currently done by major central banks and international institutions. The course draws heavily on the situation in and experience of the European Union and the euro area. In addition, selected material relating to Russia and other developed and emerging economies will be presented. Following a brief introduction of the concept of financial stability, Part 2 of the course will look at the key structural features of financial markets. Besides looking at banks, which still constitute in most economics the largest element of the financial sector, this part of the course looks also at insurance companies, pension funds, other financial institutions, often called ‘shadow banks’ and the interlinkages between these financial entities. The third part of the course presents first the main concepts used to define systemic risk in the financial sector. This is followed up by a review of systemic risk indicators and models, differentiating between (1) time series and (2) cross-sectional approaches with the latter also covering contagion channels. This general overview of financial stability identification risks will be complemented with a more specific look at the risks posed by ‘shadow banks’ and ‘fintech’ and a case study, reviewing the origins of the Global Financial Crisis starting in 2007/08. The fourth part of the course looks at policies to prevent financial crises. Both microprudential (institution-specific) banking supervision as well as systemic (macroprudential) supervision will be covered. In addition, a framework for banking sector stress tests is introduced and the main findings of the latest IMF FSAP for the Russian Federation will be discussed as a case study. The final part of the course reviews important policy tools that are used to mitigate financial crises and the negative impact on such crises on the real economy. First, different approaches to deal with non-performing assets (NPL) are presented. Second, options to restructure and to resolve distressed banks will be shown. The course is taught on the basis of Power Point Presentations. There is no single textbook available for this course but students will obtain a list of relevant documents.

Learning Objectives

to discuss the last global financial crisis in details

Expected Learning Outcomes

see how the world looked like in real time
take a look at the world through eyes of policymakers
understand financial crises

Course Contents

Introduction – the concept of financial stability
The various parts of the financial markets
Identifying financial stability risks
Preventing financial crises (RM / PH)
Mitigating financial crises (RM)

Assessment Elements

Essay
An essay is to summarise the main ideas on the causes and effects of the Global Financial Crisis.
Test 1
Test 2

Interim Assessment

2022/2023 3rd module
0.3 * Test 1 + 0.4 * Test 2 + 0.3 * Essay

Bibliography

Recommended Core Bibliography

Ben S. Bernanke. (2010). Causes of the recent financial and economic crisis: testimony before the Financial Crisis Inquiry Commission, September 2, 2010. Web Site. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.fip.fedgws.101
Gary B. Gorton, & Andrew Metrick. (2012). Getting up to Speed on the Financial Crisis: A One-Weekend-Reader’s Guide. NBER Working Papers. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.nbr.nberwo.17778
Geithner, T. F. (2014). Stress Test : Reflections on Financial Crises (Vol. First edition). New York: Crown. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=750248

Recommended Additional Bibliography

Ana Fostel, & John Geanakoplos. (2008). Leverage cycles and the anxious economy. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.858D058F
Athreya, K. B. (2014). Big Ideas in Macroeconomics : A Nontechnical View. Cambridge, Massachusetts: The MIT Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=683172
Dániel Holló, Manfred Kremer, & Marco Lo Duca. (2012). Ciss - a composite indicator of systemic stress in the financial system. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.3DE4734D
Fell, J., Grodzicki, M., Martin, R., & O, B. E. (2016). Addressing Market Failures in the Resolution of Non-Performing Loans in the Euro Area. Financial Stability Review. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecb.fsrart.201600022
Henry, J., & Kok, C. (2013). A macro stress testing framework for assessing systemic risks in the banking sector. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.8EE2F2A9
Hiebert, P., Klaus, B., Peltonen, T. A., Schüler, Y. S., & Welz, P. (2014). Capturing the Financial Cycle in Euro Area Countries. Financial Stability Review. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecb.fsrart.201400022

Authors

SCHEPELEVA MARIYA ALEKSANDROVNA

Course Syllabus