When Systems Create Crises

Even though the American subprime crisis of 2007 took many people by surprise, financial and banking crises are not new phenomena. They have occurred in most developed and developing countries for centuries. Because bank failures threaten the financial stability of an economy as well as spread economic uncertainty generally, banking crises are of great concern to policymakers. When Systems Create Crises discusses the role political institutions play in creating banking crises. Through the presentation of four case studies covering banking crises in the United States and Japan from the 1920s to the 1990s, ren argues that similar institutional developments are present in each case. Increased competition in capital markets and the loosening of financial regulation have characterized the political institutions in the periods leading to crises. This book stresses the importance of developing proper political institutions in order to prevent future crises.