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Financial Crises

Author

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  • Gary Gorton

    (Yale School of Management, Yale University, New Haven, Connecticut 06520, USA)

Abstract

Financial crises are runs on short-term debt. Whatever its form, short-term debt is an inherent feature of a market economy. A run is an information event in which holders of short-term debt no longer want to lend to banks because they receive information leading them to suspect the value of the backing for the debt, so they run. When runs are system-wide they threaten the solvency of the entire financial system, which then requires either public or private intervention to remedy. Runs, which most likely follow credit booms, are integral parts of movements in the macroeconomy.

Suggested Citation

  • Gary Gorton, 2018. "Financial Crises," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 43-58, November.
    • Handle: RePEc:anr:refeco:v:10:y:2018:p:43-58
    DOI: 10.1146/annurev-financial-110217-022552
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    More about this item

    Keywords

    financial crises; bank runs; financial intermediation;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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