Handbook of the Economics of Finance

Chapter 18

Bubbles, Financial Crises, and Systemic Risk ^*

Markus K. Brunnermeier^a and Martin Oehmke^b

^aDepartment of Economics, Princeton University, Bendheim Center for Finance, 26 Prospect Avenue, Princeton, NJ 08540, USA

^bColumbia Business School, 420 Uris Hall, 3022 Broadway, New York, NY 10027, USA, [e-mail]

Abstract

This chapter surveys the literature on bubbles, financial crises, and systemic risk. The first part of the chapter provides a brief historical account of bubbles and financial crisis. The second part of the chapter gives a structured overview of the literature on financial bubbles. The third part of the chapter discusses the literatures on financial crises and systemic risk, with particular emphasis on amplification ...