Chapter 1 introduces the topic of financial crises and discusses the outline of the book. Financial crises have occurred for centuries, and after the Great Recession of 2008 which began in the US and spread globally, both economists and policy makers have realized that economically developed countries are not immune from such phenomena. This book seeks to describe and analyze the events, causes, and outcomes of crises from the Great Depression to the Great Recession, unifying a vast amount of literature on each crisis. We start from a general discussion of the global financial system and the roots of crises, both theoretical and empirical. We then discuss crises between 1929 and 2011. We briefly discuss select events before 1929, but focus on the Great Depression and beyond since these crises were created within or bore the current policies and institutions of our current financial system. Keywords: financial crises
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Roy E. Allen
Roy E. Allen
Since the 1970s, the rapid expansion and globalization of financial markets shadows most other developments in international economics. This chapter documents and defines financial globalization and discusses what caused it: developments in information-processing technologies; government deregulation; and the more global nature of all economic activity. International interest rate and financial strategy ‘parities’ are presented as new, dominant, dynamic patterns in the global economy. Financial market globalization has been a driving force behind recent imbalances in trade and investment between countries. And, the self-adjustment mechanisms within the global economy have been irreversibly changed by financial globalization.
Robert W. Kolb
Studying an international system implies having a definition of a nation, in order to assess to what extent the analysis of an international phenomenon can be different from an analysis which does not take into consideration the existence of nations. This chapter stresses that several definitions of a nation can be given, but what is important is defining a nation from the point of view of monetary problems. By comparison with the traditional definition of a nation in trade theory, a monetary area – or a monetary nation – can be defined as an area of circulation of a currency. The chapter also discusses whether or not a monetary area should coincide, for instance, with a political area.