Emil Verner on Banking Crises, Credit Booms, and the Rise of Populism

Macro Musings with David Beckworth

Emil Verner is an associate professor of finance at MIT Sloan and is a research fellow at the National Bureau of Economic Research. Emil has written widely on financial stability, banking panics, and credit booms, and he joins David on Macro Musings to talk about these issues. Specifically, David and Emil also discuss the causes and policy implications of bank failures, the shortcomings of the Diamond-Dybvig model of bank runs, how financial crises spur the rise of populism, and much more.

Transcript for this week’s episode.

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Related Links:

*Failing Banks* by Sergio Correia, Stephan Luck, and Emil Verner

*Banking Crises Without Panics* by Matthew Baron, Emil Verner, and Wei Xiong

*Financial Crisis, Creditor-Debor Conflict, and Populism* by Gyozo Gyongyosi and Emil Verner

*Fragile by Design: The Political Origins of Banking Crises and Scarce Credit* by Charles Calomiris and Stephen Haber

*Going to Extremes: Politics After Financial Crises, 1870-2014* by Manuel Funke, Moritz Schularick, and Christoph Trebesch

Timestamps:

(00:00:00) – Intro

(00:03:45) – Why Do We Care About Banking Panics and Financial Stability?

(00:05:42) – Breaking Down the Causes of Bank Failures and its Policy Implications

(00:13:38) – Exploring the Historical Banking Data

(00:15:59) – *Failing Banks*: Key Findings and Takeaways

(00:24:00) – *Banking Crises Without Panics*

(00:28:05) – Responding to the Diamond-Dybvig Model of Bank Runs

(00:33:29) – Applying the Bank Solvency Story to the Great Financial Crisis

(00:36:16) – The Impact of Credit Booms

(00:40:56) – What Are the Necessary Policy Prescriptions?

(00:43:08) – Why is Diamond-Dybvig So Popular?

(00:47:01) – *Financial Crisis, Creditor-Debtor Conflict, and Populism*

(00:52:55) – How Do We Stem the Tide of Populism in the Future?

(00:54:36) – Outro