The Life Cycle of Systemic Risk and Crises

We present a life cycle view of systemic risk and crises that incorporates and synthesizes a number of views and organizes the theoretical and empirical research evidence in a clear fashion. We illustrate how systemic risks build during the boom, are realized during the following crisis, and are wel...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2024-12, Vol.56 (8), p.1923-1961
Main Authors: BERGER, ALLEN N., SEDUNOV, JOHN
Format: Article
Language:English
Subjects:
bailouts
banks
COVID‐19
Crises
Errors
financial crises
financial markets
Measurement
Policy analysis
real economy
systemic risk
TARP
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Summary:We present a life cycle view of systemic risk and crises that incorporates and synthesizes a number of views and organizes the theoretical and empirical research evidence in a clear fashion. We illustrate how systemic risks build during the boom, are realized during the following crisis, and are well addressed or not in the aftermath, which helps determine how well or poorly the following cycle will likely evolve. We aim to improve current understanding of systemic risk and crises, the roles of the different economic segments of society, highlight key issues of measurement, and provide guidance for future academic research and policy analysis. We address several controversies—the outsized role of the banking sector in creating and resolving systemic risks, its exclusive role in systemic risk measurement, and seemingly irrational behavior in which the same or similar costly mistakes are repeated every cycle.
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.13231