Bubbles, Financial Crises, and Systemic Risk

Author contact info: Markus K. Brunnermeier Princeton University Department of Economics Bendheim Center for Finance Princeton, NJ 08540 Tel: 609/258-4050 Fax: 609/258-0771 E-Mail: markus@princeton.edu Martin Oehmke Finance and Economics Division Columbia Business School 3022 Broadway, Uris Hall 420 New York, NY 10027 Tel: 212/851-1804 Fax: 212/316-9180 E-Mail: moehmke@columbia.edu This chapter surveys the literature on bubbles, financial crises, and systemic risk. The first part of the chapter provides a brief historical account of bubbles and financial crisis. The second part of the chapter gives a structured overview of the literature on financial bubbles. The third part of the chapter discusses the literatures on financial crises and systemic risk, with particular emphasis on amplification and propagation mechanisms during financial crises, and the measurement of systemic risk. Finally, we point toward some questions for future research.