The swiftness and devastating impact of recent financial crises have taken many market participants by surprise and pose challenges for economists seeking a theory of the onset of a crisis. We propose such a theory based on two features. The actions of diverse economic actors which undermine the...

What are the welfare effects of enhanced dissemination of public information through the media and disclosures by market participants with high public visibility? We examine the impact of public information in a setting where agents take actions appropriate to the underlying fundamentals, but...