The assignment aims to enhance your understanding on current economic topics, related to debt or/and banking crises, by looking carefully on similar events from history. You should choose one country -emerging/developing or industrial- that has experienced a financial crisis over the past decades (e.g., countries of the European periphery, Latin American or East Asian countries that suffered severe banking/currency crises in the 1980s, mid/late 1990s, or other countries such as Turkey, Russia, Argentican, etc). You cannot cover any of the countries that we will discuss in length in class, namely the United States, China, and Japan. You should focus on a large economic downturn (crisis), related to debt default, banking collapse, massive currency depreciation, or hyperinflations; please focus on a crisis period associated with a large economic downturn rather than a recession. The assignment aims at uncovering the origins of the latest crisis, but also a past crisis and then understanding similarities and differences. The assignment is thus conceptually to the highly influential work of Carmen M. Reinhart and Kenneth S. Rogoff, who have analysed the similarities of financial crisis over the past centuries. The assignment consists of the following steps: 1. Contemporary Episode (30%) Describe the most recent banking/currency/debt crisis (perhaps also hyperinflation) that the country has experienced. Specifically a. Present some statistics illustrating the severity of the crisis, its duration, and it output costs. (10%) b. Discuss its main origins. List no more than five of the main factors, but focus on the two most important ones. [It may be useful to compare this country with some other similar economies that experienced a crisis during the same period (., East Asian crisis in 1997/1998; Tequila crisis in the mid-1990s; debt crisis of early 1980s; European crisis in the early 1990)]. (20%) 2. Past Episode (30%) Using the Reinhart and Rogoff chronology or another crisis classification (., Laeven and Valencia, Systemic Banking Crisis Database, IMF Economic Review, 2013) or your knowledge of history repeat the analysis (steps (a) and (b) above) using an earlier crisis in the same country (., you could compare the 1995 crisis in Mexico with the 1850 default of Mexico). It is particularly important to cite the works or data sources that you use in the historical analysis. 3. Comparison and Persistence (40%) a. Discuss the similarities and differences of the two crises (contemporary with historical). For example are there similar driving forces? Are there similarities and differences on the response to the two crises and how different is the evolution of output? (10%) b. Discuss some mechanisms/channels that may (or may not) explain persistence. For example are there deep origins of both crises or not? (30%) Web-sources • Kenneth Rogoff’s web-site: • Barry Eichengreen’s web-site: • Alan Taylor’s web-site: • VOXEU web-site: • IMF/World Bank country reports. • Laeven, L and F. Valenica. (2013). Systemic Banking Crises Database. IMF Economic Review, 61(2): 225-270. • Project Syndicate. The Quiet Financial Crisis. 7th January 2022 Remarks • Please cite any work (policy report, academic paper, etc) that you use. Please also add hyperlinks to your citations. • You can use tables from reports or academic papers (assuming proper citation). • You should not mechanically reproduce some results/insights of others. • Maximum 10 pages; spaced. Including graphs. (bibliographic references may be in additional pages) • Maximum 5 graphs. (the graphs should be readable; do not shrink them so as to save space) �� No appendix; just bibliography.
