In August 1763, northern Europe experienced a financial crisis with numerous parallels to the 2008 Lehman Brothers episode. The 1763 crisis was sparked by the failure of a major provider of acceptance loans, a form of securitized credit resembling modern asset-backed commercial paper. The...

We study the effects of shadow banking panics in a macroeconomic model with a rich financial system, including deposit-financed retail banks and wholesale-financed shadow banks. Shadow banking panics occur when retail banks choose not to roll over their lending to shadow banks. Occasionally...