In this paper, we review three branches of theoretical literature on financial crises. The first one deals with banking crises originating from coordination failures among bank creditors. The second one deals with frictions in credit and interbank markets due to problems of moral hazard and...

In this paper, we review three branches of theoretical literature on financial crises. The first one deals with banking crises originating from coordination failures among bank creditors. The second one deals with frictions in credit and interbank markets due to problems of moral hazard and...

There are two basic approaches to explaining financial crises. One argues that they are driven by bad fundamentals, while the other one argues that they reflect panic or coordination failures among investors. The empirical literature has established a fairly strong link between fundamentals and...