Course 2019-2020 a.y.

• Financial crisis I. Introduction, causes, implications and historical perspective.
• Financial crisis II. The role of structured finance.
• Financial crisis III. The bank-run view. The model of Diamond and Dybvig.
• Leverage, financial intermediaries, and securitization.
• Credit market imperfections. Household deleverage and the Great Recession.
• Unconventional monetary policy, forward guidance, theory and evidence.
• Liquidity traps.  The role of fiscal policy.
• The European sovereign crisis.

• Define some fundamental concepts in finance, such as leverage and securitization.
• Understand how financial frictions can impact macroeconomic variables, such as income and employment.
• Illustrate the causes of financial crises and explain how financial shocks propagate to the whole economy.
• Explain the effects of monetary and fiscal policies, including the unconventional policy tools, such as forward guidance and quantitative easing.
• Describe the key elements of a sovereign crisis, such as the one recently experienced by European countries.

• Use some fundamental concepts in finance, such as leverage and securitization, which are likely to be very useful in their career.
• Apply the knowledge acquired during the course to evaluate the consequences of a financial crisis for the firm or organization they join after they graduate.
• Predict and assess the response of the central bank and the government to a major downturn caused by a financial crisis.
• Evaluate and compare the economic forecasts and views on the state of the economy made available in the internet and other media.
• Use such analysis in many of the decisions (pricing, portfolio, business investment, hiring, etc.) they are soon called to make throughout their working career.

• Face-to-face lectures
• Exercises (exercises, database, software etc.)
• Individual assignments
• Group assignments

• The material is mostly taught through traditional face-to-face lectures. In addition, the instructor teaches several tutorials throughout the course. During each tutorial, the concepts introduced during the lectures are used to answer questions and solve problems that are similar to those on the typical written examination.
• In addition, the instructor makes available (on the course website on Bboard) a list of links to very recent articles or blog posts on topics that are discussed in class - with comments aimed at clarifying how each of them is related to the models and concepts introduced during lectures. Some of these readings are used by the instructor as the starting point for 'case-study' discussions aimed at showing students how the concepts studied in the course can be used to interpret real-world economic events.
• Finally, during the semester, the instructor hands out a total of four problem sets, which students are strongly recommended to solve to make sure they are up to speed with the course. In some cases, problem sets include problems which have a similar structure to those on the final examination.

• There are four problem sets throughout the course. Each problem set is worth 10 points and only the best three problem sets are considered for the final grade.
• There is also a final written examination.
• For the final grade, the student can choose one of the two following options.
  1. Option 1 (available only in the first two exam sessions):
     • Grade on the final examination (if grade ≥ 18), with weight 70%
     • The sum of the grades on the best three problem sets, with weight 30%.
  2. Option 2: Grade on the final examination with weight 100%

There is no single textbook for this course. The instructor uses different sources, including lecture notes, slides, and other handouts, which are made available on the course website on Bboard. Students may find it interesting to read the following books (however, note that these books are not required):

• P. KRUGMAIN, The Return of Depression Economics and the Crisis of 2008, Norton & Company.
• R.G. RAJAN, Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton University Press.
• G.B. GORTON, Slapped by the Invisible Hand: the Panic of 2007, Oxford University Press.