Class 20 Financial Crisis Discussion

Class 20 Financial Crisis Discussion - 6 Outline Minsky’s...

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Class 20 Financial Crisis Read the PIMCO Article and answer the following questions: 1. Define a shadow bank and list its main differences from a regular bank. 2. Define liquidity risk and discuss how it is a function of balance sheet composition. 3. Briefly state Minsky’s “Instability Hypothesis” on p. 4. 4. Briefly outline the boom and bust cycle in the housing market from 2004 to 2007 and explain its source. 5. Describe the trigger—the Minsky moment—that commenced the cycle reversal from expansion to contraction.
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Unformatted text preview: 6. Outline Minsky’s policy perspective given on pages 10 & 11. In Preparation for Class Discussion and for you Financial Crisis paper, read the following “lessons” from the Financial Crisis from Cecchetti: (first page # is from the custom text/ second is from 3 rd edition) 1. Liquidity and Market Making Ch2 p.28/28 2. Leverage Ch 3. P 45/45 3. Interbank Lending Ch 3 p59/59 4. Shadow Banks Ch 3. P 61/61 5. Information Asymmetry Ch 11p 233/275 6. Insufficient capital Ch 12 p 250/302...
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