1. Types of Bubbles Fin254f: Spring 2010 Reinhart/Rogoff (1)

2. Outline  Book intro  Classifications  Some quick examples

3. Defining Mission  Differences from Kindleberger/Aliber Broader (international macro) perspective More (lots of) data (charts)  Trying to move on from "narrative" approach

4. Crises Types  Quantitative thresholds Inflation crises Currency crashes Currency debasement Asset price bubbles bursting  Events Banking crises External debt crises Domestic debt crises

5. Inflation Crises  1 year inflation > 40 percent  These crises much more common in recent history  Average inflation 1500-1799: 0.50% 1800-1913: 0.71% 1914-2006: 5.00%

6. Currency Crises  Drop of 15% per year No other variables  Good for post WWII

7. Currency Debasement  Currency reissue/conversion Issue new currency Record (Zimbabwe 10 billion to 1)  Usually after asset pricing bubbles

8. Bursting of Asset Bubbles  Important, but  Housing and asset prices more difficult to get long term

9. Banking Crises  Dating difficult Price of bank stocks? Changes in deposits? Asset or liability side?  Events Bank runs -> closures Large scale government assistance

10. External Debt Crises  Default on government debt Held outside country/foreign legal jurisdiction Usually in foreign currency  Default date easy  Resolutions difficult

11. Domestic Debt Crises  Debt issued by government inside country/domestic jurisdiction  Sometimes unnoticed

12. This Time is Different: Examples  1920’s Stable politics/new technologies  Asia 1990’s Conservative fiscal, stable fx rates, high growth  US 2000’s Globalization, technology, great financial system, monetary policy, securitized debt