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This chapter discusses salient factors pertaining to the Global Financial Crisis (GFC), also called the Great Recession, which gave rise to contagion effects that continue to reverberate across the global financial landscape. The GFC is linked to three primary negative themes: build-up of credit in a global credit super cycle, New Financial Architecture (NFA) and financialization under neoliberalism, and a distorted relationship between laissez-faire economics/finance and normative political imperatives. The conclusion is that we need to rethink understandings of key principles in economics and finance and reform governance mechanisms of the financial system.

The essay examines an empirical phenomenon – the GFC – and discusses themes based upon the author’s insights gained from the vantage point of working in asset management during the Crisis. In addition, the author draws upon material from the academic literature and financial press. He problematizes finance through the lens of the GFC and suggests that the three causal factors being highlighted are enduring sources of instability in the financial system.

The conclusion is that financial crises such as the GFC are not caused by unpredictable exogenous variables but instead pertain to identifiable recurring factors and human failures. Structural, epistemological, and behavioral issues are aggravated by neoliberalism. Finance is integral to economic activity. But under neoliberalism, the global financial economy rapidly assumed a particular form of financialization founded on market fundamentalism and political and regulatory capture. Neo-liberal coöptation of finance, economics, and politics needs to be reversed to place financial and economic activity within more robust frameworks that take into account credit cycles, flaws, and instabilities inherent in the system while applying appropriate regulatory mechanisms to prevent crises.

Scholars and practitioners can draw upon claims made in this essay to propose more substantive reforms to the global financial system. These range from redesigning how finance and economics are understood and taught, to imposing circuit breakers to prevent credit cycles from becoming untenable bubbles.

Neoliberalism is a political project that has distorted understanding of empirical truths while also effecting a paralysis with regard to fixing problems. The market fundamentalism that neoliberalism prescribes and promulgates results, time and time again, in financial crises that have disastrous consequences including massive wealth destruction. It is crucial to reform the system and create more sustainable, less volatile paradigms of financial and economic life.

Arguments in this chapter are simple and straightforward but have significant implications for achieving more nuanced understandings of the financial system. Claims are presented as distillations of how the system actually works, especially the way in which it tends toward conditions of crisis and stress. Mainstream finance and economics are characterized as predicated upon certain erroneous propositions, particularly concerning efficient markets and rational agency, core tenets of the neo-liberal project.

The recurrence of banking crises throughout the 1980s and 1990s, and in the more recent 2008‐09 global financial crisis, has led to an expanding empirical literature on crisis explanation and prediction. The purpose of this paper is to provide an analytical review of proxies for and important determinants of banking crises‐credit growth, financial liberalization, bank regulation and supervision.

The study surveys the banking crisis literature by comparing proxies for and measures of banking crises and policy‐related variables in the literature. Advantages and disadvantages of different proxies are discussed.

Disagreements about determinants of banking crises are in part explained by the difference in the chosen proxies used in empirical models. The usefulness of different proxies depends partly on constraints in terms of time and country coverage but also on what particular policy question is asked.

The study offers a comprehensive analysis of measurements of banking crises, credit growth, financial liberalization and banking regulations and concludes with an assessment of existing proxies and databases. Since, the review points to the choice of proxies that best fit specific research objectives, it should serve as a reference point for empirical researchers in the banking crisis area.

The significant economic weight of the Eurozone in the globe caused the contagion of the Eurozone debt crisis on the emerging markets. The Eurozone debt crisis caused the sudden plummeting of the cross-border bank credit (BC) to India causing a significant impact on bank lending in India. Essentially, the purpose of this study is to find an answer to the question: Did the decline in cross-border cross-credit from Eurozone had an impact on domestic BC in India?

Using the data for the period from 2000 to 2013 sourced from Bank for International Settlements international banking statistics consolidated data sets, the novel specification of the study captures the impact of Eurozone cross-border credit on India by developing two regression frameworks that capture the pre-Euro debt crisis period scenario and post-Euro debt crisis period scenario.

The results offer a very interesting analogy of the behavior of BC and cross-border credit during the pre and post-Eurozone crisis scenarios of analysis. During the pre-Eurozone crisis period, cross-border credit displayed a significant negative relationship with BC indicating that cross-border credit to the Indian firms indirectly benefitted the banks by creating increased demand for domestic BC. The post-Eurozone crisis period witnessed a nexus between cross-border credit and BC during the pre-Eurozone crisis period, which gradually disappeared largely because of the onset of the Eurozone crisis.

This study is a first of its kind in investigating the impact of the Eurozone crisis on an emerging economy like India. This study supports the hypothesis of the existence of the transmission of financial shocks through the balance sheets of international banks. The findings conform to the policy concerns of most of the emerging economies that international banks transmit financial shocks from their home countries. The implication for India and other emerging economies is that international credit growth deserves careful monitoring.

This paper aims to focus on the banking crises recorded in Italy in the period 1861-2016 and to propose a novel classification based upon the timing of the crisis with respect to the business cycle.

A simple and objective rule to distinguish between slowdown and inner-banking crises is introduced. The real impact of banking crises is evaluated by integrating the narrative approach with an empirical vector autoregression analysis.

First, banking crises are not always associated to economic downturns. Especially in Italy, (but this analysis can be easily extended to other countries), they have often limited their negative effects within the financial system (“inner” crises). Second, the simultaneity of macroeconomic effects (credit contraction and GDP recession) leave the causal link undetermined. Third, the empirical and narrative analyses performed testify that boom–bust mechanisms are an exception in the panorama of (Italian) banking crises; although when the economy experiences such episodes, the economic and social consequences are not only severe but also enduring.

To classify historically recognized banking crisis episodes, the authors look at credit and GDP dynamics (and their ratio) around crisis years. Relying on a single definition of crisis is avoided. The classification provides an empirical rule to determine in what way banking crises differ. The classification is mostly based on the synchronization with the business cycle and, using the documented evolution of macroeconomic aggregates, it permits to highlight the fact that a variety of interactions occur between financial and real aggregates during and around banking crises.

As to the concept of systemic banking crisis, a qualitative judgment is often adopted to select relevant episodes, thus confirming the absence of a quantitative rule in classification criteria (Chaudron and de Haan, 2014). This paper proposes a simple and objective rule to distinguish between slowdown and inner-banking crises; the former occur close to a GDP contraction, whereas the latter appear to spread their effects with no substantial evidence of output loss.

The conventional and new inflation bias theories present two distinct facets to explain the outcome of excess inflation without output gains by a discretionary central banker. First is the temptation to achieve a higher than potential output, and, second is not to let it falter. The authors explicitly account for these two distinct dimensions in empirical formulations both exogenously and endogenously. Specifically, the purpose of this paper is to investigate what monetary discretion can and cannot do in terms of dual objectives – inflation and growth – across boom and bust cycles, both directly and indirectly.

(i) Segregate the economic activity into boom and bust cycles; (ii) Explicitly account for the two dimensions of conventional and new inflation bias theories; and (iii) model and estimate the direct and indirect effects of monetary discretion across business cycles.

The results indicate considerable asymmetries in the effects of monetary discretion and distribution thereof across objectives and cycles. The direct impact of monetary discretion tends to induce significantly higher inflation in boom and bust cycles, while it exerts a positive but insignificant effect on output. The inflation effects are more pronounced in boom than bust cycles and vice versa are the output effects. The indirect effects on output via inflation are significantly pernicious, which are more pronounced in expansions than recessions.

In a nutshell, instead of benefiting, monetary discretion tends to harm in terms of both the dual policy objectives, which cautions about its well calculated and constrained use only.

The purpose of this study is to provide a comprehensive review of the literature on financial inclusion, with a focus on its relationship to financial and economic development.

This paper begins by surveying the field of financial inclusion research over the past 15 years, highlighting the evolution of how financial inclusion has been studied in practice. By reviewing 107 studies published between 2008 and 2023 in 63 peer-reviewed journals, the study emphasizes the importance of recent research in this field.

The analysis reveals key findings on the positive impact of financial inclusion on economic growth, poverty reduction, financial stability and CO₂ emissions, among other factors. Despite the extensive empirical and theoretical work accomplished in the field, the study argues that there is still a need for further research on financial inclusion, including exploring new regions and financial and economic development indicators such as social capital, entrepreneurship and political stability.

This research aspires to map the emerging discourse on this topic, identify major gaps, and provide a productive line to guide future research. This will contribute to the ongoing debate led by the World Bank on financial inclusion as an effective measure to fight poverty. This study attempts to proffer ideas to encourage collaborative research and deepen our understanding on the role of financial inclusion.

This study offers a comprehensive overview of recent research on financial inclusion and highlights the need for further research in this field. This study also proposes a promising future research agenda to guide future advancements in the area of financial inclusion.

In this paper we investigate the relationship between loose monetary policy, low inflation, and easy bank credit and house price booms.

Using a panel of 11 OECD countries from 1920 to 2011 we estimate a panel VAR in order to identify loose monetary policy shocks, low inflation shocks, bank credit shocks, and house price shocks.

We show that during boom periods there is a heightened impact of all three “policy” shocks with the bank credit shock playing an important role. However, when we look at individual house price boom episodes the cause of the price boom is not so clear. The evidence suggests that the house price boom that occurred in the United States during the 1990s and 2000s was not due to easy bank credit.

Shocks from the shadow banking system are not separately identified. These are incorporated into the fourth “catch-all” shock.

Our evidence on housing price booms that expansionary monetary policy is a significant trigger buttresses the case for central banks following stable monetary policies based on well understood and credible rules.

This paper uses historical evidence to evaluate the relative importance of three main causes of house price booms. Our results bring into question the commonly held view that loose bank credit was to blame for the U.S. house price bubble of the later 1990s.

The purpose of this paper is to compare and contrast three‐factor models of boom and bust from Henry George, Knut Wicksell and Mason Gaffney.

The approach takes the form of an analysis and discussion and mathematical appendix.

It was found that gaffney modifies and incorporates features of both George and Wicksell into his own model.

The works of George, Wicksell and Gaffney are highly relevant, especially given the current economic crisis.

The paper should be useful both to historians of economic thought and contemporary economists. It brings together ideas that have been neglected in recent years, and contributes to the understanding of economic crises.

F. A. Hayek’s macroeconomic theory and policy ideas have gained renewed attention since the cheap-money boom until 2007, and subsequent bust, followed the basic Hayekian narrative. Only to a very limited extent, however, do we find Hayek’s ideas on the agenda of mainstream macroeconomic researchers since Robert Lucas’s research program gave way to “Neoclassical” and “New Keynesian” DSGE models. We find examples of deeper interest on the periphery of the mainstream. Hayek’s influence on today’s macroeconomic policy discussions remains similarly limited, although he has become an icon to some opponents of loose monetary policy.