This paper provides an early diagnosis of the financial crisis in Asia, focusing on the empirical record in the lead-up to the crisis. The main goal is to emphasize the role of financial panic as an essential element of the Asian crisis. At the core of the crisis were large-scale foreign capital...

In this paper we first trace the changing nature of banking, currency and debt crises from the last century to the present. Each type of crisis has transmogrified in the presence of official intervention and the creation of a safety net. A similar pattern is observed for international rescue...

Post WWII globalization forces are facing headwinds in the form of global crises-the “The Great Recession” and the “The Pandemic Recession”. Israel’s trade and financial globalization, however, is steadily rising. The pandemic-induced slump in economic activity is deep, as consumer...

We show how bundling, exclusivity and additional markets internalize fire sale and other pecuniary externalities. Ex ante competition can achieve a constrained efficient allocation. The solution can be put rather simply: create segregated market exchanges which specify prices in advance and...

We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to survive a run. The incomplete information means that the...

Economic growth is persistently low following a financial crisis, possibly because of a continuing weal banking system. In a financial crisis bank health is significantly damaged. Post-crisis regulatory changes have aimed at restoring bank health, but measuring bank health by Tobin's Q, we find...

I review The End of Alchemy by Mervyn King, published by W.W. Norton and Company in 2016. I discuss King's proposed regulatory reform, the ‘Pawn Broker for All Seasons' (PFAS) and I compare it to an alternative solution developed in my own work. I argue that unregulated trade in the financial...

We examine austerity in advanced economies since the Great Recession. Austerity shocks are reductions in government purchases that exceed reduced-form forecasts. Austerity shocks are statistically associated with lower real GDP, lower inflation and higher net exports. We estimate a...

This address considers the epidemiology of narratives relevant to economic fluctuations. The human brain has always been highly tuned towards narratives, whether factual or not, to justify ongoing actions, even such basic actions as spending and investing. Stories motivate and connect activities...

We study the behavior of credit and output across a financial crisis cycle using in- formation from credit spreads and credit growth. We show the transition into a crisis occurs with a large increase in credit spreads, indicating that crises involve a dramatic shift in expectations and are a...