The world economic crisis that began in 2007 was the worst economic crisis since the 1930s. It has prompted enormous economic stimulus packages and a new discussion about financial regulation. The aftermath of this crisis restricts future fiscal and social possibilities for most countries. A group of European states has entered a period of prolonged fiscal and structural problems and for the first time, the Euro-zone faces severe problems. - What were the reasons for this crisis, how might it be explained? How was it possible and why is it so difficult to learn from past experience?
 

Financial and economic crisis are all but singular events. This course compares the recent world economic crisis (2007-2010?) with the Great Depression (1929-33) and its aftermath, and also with the international oil-price crisis (1973/74), the Asian-crisis (1997) and the so-called dot.com bubble (1999-2000) that did not similarly infect the world economy. These crises offer empirical evidence for a general analysis of financial and economic crises. The course focuses on a comparative analysis of crises and on the analysis of political and corporate responses to crises on the national and international level.

Based on (1) the analysis of the long-term development of the ‘international monetary system’ and the ‘financial globalization’, (2) on the discussion of theoretical explanations of financial crisis, and (3) on a comparative historical analysis of past crises and corporate responses to crises, the students analyze the course and the causes of the recent world economic crisis and strategies of governments, international institutions, and companies to cope with it.

The aims of this course are to:

• engross the students’ understanding of economic crises as well as theoretical reflections on crises,
• expand the students’ knowledge and understanding of international institutions (financial, political, etc.),
• enhance the students’ ability to analyze complex economic processes,
• find out whether there are specific corporate strategies to survive economic crisis,
• point out the possible gains of historical comparison and warn against (hopefully) wrong historical parallels.

The course will enlarge the students’ capability to analyze critical industrial and economic development, which is necessary for the design of corporate or political institutions’ strategies towards crises; it will, however, not train technical tools.

The course's development of personal competences:

Students improve their capability to analyze general economic development and their knowledge and understanding of financial and economic crises (and respective theoretical approaches). They learn to identify and to analyze the impact of different institutional arrangements, the role of the state and international organizations on the courses of financial and economic crises and they will create knowledge on approaches how to cope with crises both on the macro (governmental) and the micro (corporate) level.

Furthermore, the students enhance their capacity to apply theoretical concepts in order to explain economic and industrial development and to analyze corporate strategies. By comparative analysis of different countries, industries and time periods, they, furthermore,increase itheir nter-cultural competences and historical knowledge.

The course requires intensive reading in order to prepare the classes (appr. 40-50 pp. for each class) and additional reading beyond the syllabus in order to write the project.

A compendium and a compulsory syllabus with up-to-date papers and articles will be constructed until 15 August 2011 (the recent crisis is a field of ongoing research).

Books

Reinhart, Carmen M. / Rogoff, Kenneth S. (2009), This Time is Different. Eight Centuries of Financial Folly, Princeton: Princeton University Press (select chapters)

James, Harold (2009), The Creation and Destruction of Value. The Globalization Cycle, Cambridge, Mass. et. al.: Harvard University Press

Kindleberger, Charles P. / Aliber, Robert Z. (2005): Maniacs, Panics, and Crashes. A History of Financial Crises, Fifth Edition, Hoboken: Wiley (select chapters)

Krugmann, Paul (2008), The Return of Depression Economics and the Crisis of 2008, London: Norton & Co. (select chapters)

Minsky, Hyman P. (2008, Orig. 1986), Stabilizing an Unstable Economy, New York et al.: McGraw Hill (select chapters)

Rajan, Raghuram G. (2010), Fault Lines. How Hidden Fractures still Threaten the World Economy, Princeton: Princeton University Press (select chapters)

Temin, Peter (1989), Lessons from the Great Depression, Cambridge, Mass.: MIT Press (select chapters)

Articles / Working Papers (available via CBS library e-resources or via econpapers)

Barro, Robert J. (2001), "Economic Growth in East Asia before and after the Financial Crisis", NBER Working Paper Series 8330

Barsky, Robert B./Kilian, Lutz (2004): “Oil and the Macroeconomy Since the 1970s“, in: Journal of Economic Perspectives, vol. 18, no. 4, pp. 115-134

Bernanke, Ben S. (1983), "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression", in: American Economic Review 73, no. 3, 257-276

Bordo, Michael (2008): “An Historical Perspective on the Crisis of 2007-2009”, NBER Working PaperSeries 14569

Brunnermeier, Markus (2009): “Deciphering the Liquidity and Credit Crunch 2007–2008”, in: Journal of Economic Perspectives, vol. 23, no. 1, pp. 77-100

Cecchetti, Stephen G. (2009), "Crisis and Response: The Federal Reserve in the Early Stages of the Financial Crisis", in: Journal of Economic Perspectives 23, no. 1, 51-75

Coval, Joshua, Jakub Jurek, et al. (2009), "The Economics of Structured Finance", in: Journal of Economic Perspectives 23, no. 1, 3-25

Dore, Ronald (2008): “Financialization of the global economy”, in: Industrial and Corporate Change, vol. 17, no. 6, pp. 1097–1112

Eichengreen, Barry and Peter Temin (2000), "The Gold Standard and the Great Depression", in: Contemporary European History 9, no. 2, 183-207

Eichengreen, Barry / Sussmann, Nathan (2000): “The International Monetary System in the very long run”, IMF Working Paper WP/0043

Hellwig, Martin (2008), "Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Crisis", Reprints of the Max Planck Institute for Research on Collective Goods, no. 43

Mishkin, Frederic S. (2005), "Is Financial Globalization Beneficial?", in: Journal of Money, Credit and Banking, vol 39, no. 2-3, 259-294

Imad A. Moosa (2010): Basel II as a casualty of the global financial crisis, in: Journal of Banking Regulation, vol. 11, no. 2, 95–114

Olson, Mancur (1988), “The productivity slowdown, the oil shocks, and the real cycle, in:The Journal of Economic Perspectives, vol. 2, No. 4, pp. 43-69

Schwartz, Anna J. (2009): “Origins of the financial market crisis of 2008”, in:Cato Journal, vol. 29, no. 1, pp. 19-23

Stiglitz, Joseph (1999), "Lessons from East Asia", in: Journal of Policy Modeling, vol. 21, no. 3, 311-330

Temin, Peter (1993), "Transmission of the Great Depression", in: Journal of Economic Perspectives, vol. 7, no. 2, 87-102

Smart, Carolyne / Vertinsky, Ilan (1984), “Strategy and the Environment: A Study of Corporate Responses to Crisis”, in: Strategic Management Journal, vol. 5, 199-213