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ERC grant: Short memory and the instability of the financial system?

Posted on 31 March 2020

In his ERC Project, Professor Youssef Cassis will examine how financial actors remember financial crises, looking for a missing link in the understanding of their recurrence. 

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In March 2020, five EUI researchers were awarded ERC advanced grants.

The research will explore the extent to which the memory of previous financial crises can explain practices threatening the stability of the financial system. Surprisingly, two questions to better understand the behaviour of financial agents, marked by recurrent waves of over-confidence and excessive risk-taking, have never been asked. Do financial actors have any knowledge, memory and understanding of previous financial crises? More generally, how far are they aware of the inherent instability of the financial system?

By combining financial history and memory studies for the first time in a single study, Professor Youssef Cassis embarks on a quest to answer these questions. So far, economic historians have paid no attention to memory, while cultural historians have shown no interest in financial crises.

If we get a better idea of the behaviour of financial agents we can gain a better understanding of the causes of financial crises in general, and the Global Financial Crisis in particular,” Professor Youssef Cassis said.

The memory of financial crises will be analysed in a number of ways, in particular through a vast oral history programme. Cassis and his team will interview the leading financial actors both at the time of the outbreak of the subprime crisis (2007) and some fifteen years later. They will also sift through the press coverage of the most severe financial shocks of the twentieth century. The researchers will focus in particular on the financial press, as well as policy reports and analyses, of the Great Depression of the 1930s, the International Debt Crisis of 1982, the Asian Financial Crisis of 1997, and the Global Financial Crisis of 2008. The research project will also pay attention to the emphasis given to financial crises in the teaching of economics and finance since the Second World War; and the use of memory for political purposes.

The ERC grant provides a unique opportunity to reflect on how the Global Financial Crisis is remembered over a decade after the collapse of Lehman Brothers, when its memory is already fading and shifting, as well as being reconstructed and used by various interest groups,” Cassis explained. “It also offers a chance to propose a new vision of financial crises, focused on financial actors, which could provide a missing link in the understanding of their recurrence.”

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Cassis-Youssef

Project title: The Memory of Financial Crises: Financial Actors and Global Risk
Youssef Cassis is Professor of Economic History (Emeritus), European University Institute