Working Paper: NBER ID: w18397
Authors: Gary B. Gorton
Abstract: Economic growth involves metamorphosis of the financial system. Forms of banks and bank money change. These changes, if not addressed, leave the banking system vulnerable to crisis. There is no greater challenge in economics than to understand and prevent financial crises. The financial crisis of 2007-2008 provides the opportunity to reassess our understanding of crises. All financial crises are at root bank runs, because bank debt--of all forms--is vulnerable to sudden exit by bank debt holders. The current crisis raises issues for crisis theory. And, empirically, studying crises is challenging because of small samples and incomplete data.
Keywords: financial crisis; bank runs; bank debt; credit booms; liquidity
JEL Codes: E02; E3; E30; E32; E44; G01; G1; G2; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial crises (G01) | bank runs (E44) |
| credit booms (F65) | financial crises (G01) |
| government interventions (H53) | expectations during crises (H12) |
| expectations during crises (H12) | bank runs (E44) |
| excessive lending (G21) | fragility in banking system (F65) |
| repos (Y60) | complications in bank runs (E44) |