This important volume presents key contributions to the study of financial crises from many different areas of economics. The book offers an economic history of financial crises, empirical studies of crises in the modern era, and classic works on the theory of banking crises. It also covers specialized topics, with sections on currency crises and financial contagion. Undergraduate students of money, banking, macroeconomics and financial crises alike will find this collection to be an invaluable overview of a critical area of study.

The authors argue that the view that market-based systems are best is simplistic; a more nuanced approach is necessary. Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow intertemporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely. In the United States and the United Kingdom competitive markets dominate the financial landscape, whereas in France, Germany, and Japan banks have traditionally played the most important role. Why do different countries have such different financial systems? Is one system better than all the others? Do different systems merely represent alternative ways of satisfying similar needs? Is the current trend toward market-based systems desirable? Franklin Allen and Douglas Gale argue that the view that market-based systems are best is simplistic. A more nuanced approach is necessary. For example, financial markets may be bad for risk sharing; competition in banking may be inefficient; financial crises can be good as well as bad; and separation of ownership and control can be optimal. Financial institutions are not simply veils, disguising the allocation mechanism without affecting it, but are crucial to overcoming market imperfections. An optimal financial system relies on both financial markets and financial intermediaries.

The theory of competition has held a central place in economic analysis since Adam Smith. This book, written by one of the most distinguished of contemporary economic theorists, reports on a major research program to provide strategic foundations for the theory of perfect competition. Beginning with a concise survey of how the theory of competition has evolved, Gale makes extensive and rigorous use of dynamic matching and bargaining models to provide a more complete description of how a competitive equlibrium is achieved. Whereas economists have made use of a macroscopic description of markets in which certain behavioral characteristics, such as price-taking behavior, are taken for granted, Gale uses game theory to re-evaluate this assumption, beginning with individual agents and modelling their strategic interaction. A strategic foundation for competitive equilibrium shows how such interaction leads to competitive, price-taking behavior. Essential reading for graduate courses in game theory and general equilibrium.

This 1983 book is a wide-ranging study of the macroeconomic side of monetary theory. Traditional macroeconomics uses simple, aggregative models to analyse monetary and fiscal policy. Gale argues that we cannot do without it but also that it rarely attains the standards of rigour required of modern theory. This book can be seen as an attempt to do it properly. The early chapters are critical and reconstructive. They take a fresh look at standard topics such as wealth effects, money and growth and the long-run effects of monetary and fiscal policy. Later chapters develop different themes. The questions raised are drawn from traditional macroeconomics but there are plenty of surprises. The conventional view is frequently turned on its head or shown to be unsatisfactory or not robust. This and other exciting ideas enliven a book which will continue to be of interest to students and theorists alike.

As the title suggests, this book deals mainly with what can be described as the general-equilibrium approach to monetary theory. The author does not attempt an encyclopaedic treatment, but investigates the central problems and ideas in the development of contemporary monetary theory. The first part of the book - technically the easier - deals with questions which will be recognized as falling within the traditional field of (macroeconomic) monetary theory, although the treatment is unflaggingly microeconomic. The second part is less conventional, dealing with the general equilibrium theory of money in a fundamental way.

What causes a financial crisis? Can financial crises be anticipated or even avoided? What can be done to lessen their impact? Should governments and international institutions intervene? Or should financial crises be left to run their course? In the aftermath of the recent Asian financial crisis, many blamed international institutions, corruption, governments, and flawed macro and microeconomic policies not only for causing the crisis but also unnecessarily lengthening and deepening it.
Based on ten years of research, the authors develop a theoretical approach to analyzing financial crises. Beginning with a review of the history of financial crises and providing readers with the basic economic tools needed to understand the literature, the authors construct a series of increasingly sophisticated models. Throughout, the authors guide the reader through the existing theoretical and empirical literature while also building on their own theoretical approach. The text presents the modern theory of intermediation, introduces asset markets and the causes of asset price volatility, and discusses the interaction of banks and markets. The book also deals with more specialized topics, including optimal financial regulation, bubbles, and financial contagion.

The theory of competition has held a central place in economic analysis since the time of Adam Smith. This book, written by one of the most distinguished of contemporary economic theorists, reports on a major research program to provide strategic foundations for the theory of competition. Making use of insights from game theory, search theory and bargaining theory, the author develops a model to explain what actually goes on in markets and how a competitive general equilibrium is achieved. Essential reading for graduate courses in game theory and general equilibrium.

This 1983 book is a wide-ranging study of the macroeconomic side of monetary theory. Traditional macroeconomics uses simple, aggregative models to analyse monetary and fiscal policy. Gale argues that we cannot do without it but also that it rarely attains the standards of rigour required of modern theory. This book can be seen as an attempt to do it properly. The early chapters are critical and reconstructive. They take a fresh look at standard topics such as wealth effects, money and growth and the long-run effects of monetary and fiscal policy. Later chapters develop different themes. The questions raised are drawn from traditional macroeconomics but there are plenty of surprises. The conventional view is frequently turned on its head or shown to be unsatisfactory or not robust. This and other exciting ideas enliven a book which will continue to be of interest to students and theorists alike.