This paper investigates the determinants of liquidity crises based on the dynamics of banking and finance under uncertainty. The explanatory power of this framework is tested against the events of the global financial crisis. Despite limited availability of data that can proxy for uncertainty,...

The majority of commentators, along with the public opinion, are inclined to identify the causes of the last financial crisis in a combination of traditional market and regulatory failures in the operation and regulation of financial markets. Whatever cannot be explained along these lines is...

This article analyzes the last financial crisis focusing on the recurrent dynamics of externalities in banking. It shows that two major determinants of the crisis were the uncertainty of a new form of financial intermediation and the failure of regulation to cope with its externalities....