Debt, Financial Fragility, and Systemic Risk
OXFORD UNIVERSITY PRESS 1998 (REVISED AND EXPANDED PAPERBACK EDITION), ISBN 0-19-823331-0
A remarkable feature of the period since 1970 has been the patterns of rapid and turbulent change in financing behaviour and financial structures in many countries. These patterns have often, in turn, been marked by rising indebtedness, default on loans, and periods of financial instability, whether in the non-financial sectors, the financial sector, or both, which have spilled over onto macroeconomic performance more generally.
This book explores, both in theoretical and empirical terms, the nature of the relationships between the underlying phenomena, namely levels and changes in borrowing (debt), vulnerability to default in the household and corporate sectors (financial fragility), and widespread disorder in the financial sector (systemic risk). This book focuses on the wider generality of the phenomena at issue, whereby similar patterns are observable in some countries, but not in others, as well as in the international capital markets. Particular attention is paid to the nature and evaluation of financial structure, and associated regulation, to the genesis of financial instability.
In this extended and revised edition, the macroeconomic consequences of fragility and the appropriate policy response are examined in particular detail, with the analysis focusing on macroeconomic performance over 1988-93. A wide range of issues relating to financial stability, including risk in payments systems, derivatives and property lending are also considered.
Given the international focus of the analysis, the work is germane to understanding the behaviour of financial systems in all capitalist economies, as well as in the international capital markets. However, it will be of particular relevance to the analysis of the USA, Japan, Germany, France, the UK, Canada, Sweden, Norway Finland,. Italy and Australia, whose recent experience is examined in some detail.
"....an excellent review of the present state of knowledge in this area...bound to be required reading for all students of banking and finance" - Tad Rybczinski, The Business Economist
"students of financial disorder will ignore this work at their peril...I predict it will constitute the beginning point for most future work in the financial disorder filed" - Jack Guttentag, Journal of Economic Literature
"a valuable addition to the literature...should be read by all monetary economists and macroeconomists" Sheila Dow, The Economic Journal
"an excellent new book....a compelling argument" - Will Hutton, The Guardian