Knutsen, Sverre and Sjögren, Hans (2009): Institutional Clash and Financial Fragility. An Evolutionary Model of Banking Crises.
Download (150kB) | Preview
There are mainly two types of theories explaining banking crisis, emanating from the monetarist school respectively institutional economics. Using an allegory, monetarists are discussing how much water in terms of liquidity that is needed to stop a fire escalating into a disaster, while institutionalists are occupied with the causes of the fire. Our study rejects the explanatory value of the monetarist view, but also criticizes the Kindleberger-Minsky model for not taking the legalisation and the sanctions in the hands of the authorities into account. We consider the institutional factor as a decisive part in the understanding of systemic risk and the process towards increasing debt in non-financial sectors and introduce the concept institutional clash. Not every recession has caused a banking crisis. But all banking crises have been preceded by an institutional clash. Consequently, an institutional clash is a prerequisite but not sufficient to cause a banking crisis: there must be a recession for a crisis to emerge. We also launch a stage-model for the evolution of banking crises. The stages in that model highlight decisive factors before, under and after a crisis. Our model has the capability to explain the occurrence of crises in a re-regulated economy. However, we only give few examples from Nordic banking crises how our model could be applied. Thus, the article is explorative. It is natural to make further empirical observation in order get a solid theory of driving forces behind banking crisis. The next step would be to empirically integrate all the Nordic banking crises between 1850 and 2000 in our analysis.
|Item Type:||MPRA Paper|
|Original Title:||Institutional Clash and Financial Fragility. An Evolutionary Model of Banking Crises|
|Keywords:||Banking history, banking crisis, finance, institutional theory, Denmark, Finland, Norway, Sweden, Scandinavia|
|Subjects:||N - Economic History > N2 - Financial Markets and Institutions > N24 - Europe: 1913-
N - Economic History > N8 - Micro-Business History > N84 - Europe: 1913-
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Bernardo Batiz-Lazo|
|Date Deposited:||03. Feb 2009 23:56|
|Last Modified:||12. Feb 2013 23:14|
Caprio, C. Jr (1998), Banking on crises: Expensive lessons from recent financial crises, The World Bank: Development Research Group, June.
Carr, E. H. (1988): What is History?, reprint 2. rev. utgave, Basingstoke : Macmillan
Davis, E P (1994), “Causes of financial crises in a deregulated economy”, in Macroeconomic surveillance aiming to detect potential or emerging financial crises, The Banking, Insurance and Securities Commission of Norway, Oslo.
Davis, E P (1995), Debt, financial fragility and systemic risk. Oxford University Press.
Dow, J (2000), "What is Systemic Risk? Moral Hazard, Initial Shocks, and Propagation", In Monetary and Economic Studies, December 2000.
Eichengreen, B. & Portes, R., The Anatomy of Financial Crises in Potes, R. and & Swoboda, A.K. (eds.), Threats to International Financial Stability, Cambridge: 1987
Fisher, I (1933), “The Debt Deflation Theory of Great Depressions”, Econometrica, Vol.1, No.4, 1933, pp 337-57.
Friedman, M. and A. Schwartz (1963): A monetary history of the United States 1867-1960, Princeton N.J.: Princeton University Press.
Hansen, P H (1996) På glidebanen til den bitre ende. Dansk bankvæsen i krise 1920-1933, Odense: Odense University Press.
Hansen, P H (1995), “Banking Crises and Lenders of Last Resort: Denmark in the 1920s and the 1990s”, in Y Cassis, G D Feldman and U Olsson (eds), The Evolution of Financial Institutions and Markets in Twentieth-century Europe, Aldershot: Scholar Press.
Herrala, R (1999), “Banking Crisis vs. Depositor Crises: the Era of the Finnish Markka 1865-1998”, Scandinavian Economic History Review, Vol XLVII, No 2.
Hove, S.I., og K. Moum (1997): ”Fra kjøpefest til ledighetskø. Kredittliberalisering, konsumutvikling og konjunktursvingninger 1983-1993”, i Økonomiske analyser nr. 8, Oslo: Statistisk Sentralbyrå.
Kindleberger, C P (1978/89), Manias, Panics and Crashes. A History of Financial Crises, London (second edition).
Kjellman, A (1994), “Banking Crisis and Bank Performance. Economies of Scale and Scope within the Finnish Banking Industry”, Meddelanden från Ekonomisk-statsvetenskapliga fakulteten vid Åbo Akademi, Ser A:415, Åbo.
Kjellman, A (1996), “What can we learn from the Finnish Banking Crisis. The cases of the failures in saving bank sector”, Meddelanden från Ekonomisk-statsvetenskapliga fakulteten vid Åbo Akademi, Ser A:458, Åbo.
Knutsen, S. & G.J. Ecklund (2000): Vern mot kriser? Norsk finanstilsyn gjennom 100 år, Bergen: Fagbokforlaget.
Kuusterä, A (1995), Idé och pengar: Sparbankerna i det Finländska samhället 1822-1994. Helsingfors: Förlagsaktiebolaget Otava.
Kuusterä, A (1998), Pelisäänöt. Helsign Rahamarkkinakeskuksen lyhyt historia. Julkaisija: Rahakontti Oy.
Larsson, M (1998), Staten och kapitalet. Det svenska finansiella systemet under 1900-talet. Stockholm: SNS förlag.
Larsson, M & Sjögren, H. (1995), Vägen till och från bankkrisen, Stockholm: Carlssons förlag.
Lindgren, H. and H. Sjögren (2003): Banking systems as “ideal types” and as political economy: The Swedish case, 1820-1914 in Forsyth, D.J. and Verdier, D. (eds.): The Origins of National Financial Systems. Alexander Gerschenkron reconsidered, London: Routledge
Minsky, H. P. (1982): Can “it” happen again?: essays om instability and finance, New York : M.E. Sharpe