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I am looking for an academic textbook on the science of financial crises, such as bank runs, monetary crisis, bubbles, stock market crashes etc.

Ideally, the textbook would address what is currently known about why crises happen, explained in objective and scientific language, explaining the underlying mechanics and/or the known leading indicators.

Finally, the textbook does not need to focus on a particular crisis e.g. the 1929 or 2007 crisis, preferably it would be a general treatment of the subject.

Thank you!

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  • $\begingroup$ What kind of textbook are you looking for? One that is written by a respected scientist, but that aimes at the public as an audience or one with a narrower academic audience (such as researchers and graduate students in the field)? $\endgroup$ – Bayesian Jan 15 at 12:36
  • $\begingroup$ I think both could be useful for my research. - It is more important for me that is is based on objective science and not the personal opinion of the author - Build upon a statistic, mathematical or economic framework - It should be something that I could cite on a research paper, as I am currently doing multidisciplinary research - I would guess the second book, as long as it is (1) mostly self-contained (maybe excepting basic math or economic theory) and (2) has a general scope / overview the field (think more like review paper rather than a research article) $\endgroup$ – Enk9456 Jan 15 at 12:49
  • $\begingroup$ Another way to put it, maybe a textbook that a professor would use for an imaginary course "Financial Crises" in undergrad school $\endgroup$ – Enk9456 Jan 15 at 12:57
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One of my favorites in this dimension is "This Time Is Different" by Reinhart and Rogoff. Both are respected scholars. The title already suggests what they aim at.

Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes—from medieval currency debasements to today’s subprime catastrophe.

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  • $\begingroup$ Thank you for your suggestion! $\endgroup$ – Enk9456 Jan 15 at 13:07
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    $\begingroup$ +1 because the book still has quite a lot of useful insight, but it would be worth while mentioning that parts of the book on the relationship between growth and debt based on their now infamous paper were discredited so chapters of the book that deal with debt and growth have to be taken with a grain of salt. Especially what they say in their chapter on debt thresholds is no longer accepted by profession. $\endgroup$ – 1muflon1♦ Jan 15 at 15:00
  • $\begingroup$ Also, this book was published in 2009 (so mostly written before then). As such it would've been unable to say very much about the mistakes made and lessons learnt during the 2007–09 crisis. $\endgroup$ – user18 Jan 16 at 4:10
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My favorite, and this is my main area of expertise, so I've read many, is Gary Gorton's Misunderstanding Financial Crises: Why We Don't See Them Coming. It's focused on the history in the United States, but it's a tight historical summary of crises framed in a unifying theory.

Relatedly, the Yale Program on Financial Stability's Resource Library is a great collection of, well, resources. Case studies, primary source documents, etc. Also, A Survey of Systemic Risk Analytics (Bisias, Flood, Lo, Valavanis) is a nice survey (now slightly dated, but still relevant) of the systemic risk literature with respect to metrics.

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From the heterodox economics perspective, Hyman Minsky wrote about this topic extensively for decades. His mathematical approach might be viewed as behind the times, but his description of the mechanics is quite well respected at this point. Modern authors have been going back to his description, and putting into new mathematical frameworks, but most of that work are articles.

Either “Can ‘It’ Happen Again?” or “Stabilizing an Unstable Economy” would be good starting points.

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