NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Some Reflections on the Recent Financial Crisis

Gary B. Gorton

NBER Working Paper No. 18397
Issued in September 2012
NBER Program(s):   AP   CF   EFG   ME

Economic growth involves metamorphosis of the financial system. Forms of banks and bank money change. These changes, if not addressed, leave the banking system vulnerable to crisis. There is no greater challenge in economics than to understand and prevent financial crises. The financial crisis of 2007-2008 provides the opportunity to reassess our understanding of crises. All financial crises are at root bank runs, because bank debt—of all forms—is vulnerable to sudden exit by bank debt holders. The current crisis raises issues for crisis theory. And, empirically, studying crises is challenging because of small samples and incomplete data.

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Document Object Identifier (DOI): 10.3386/w18397

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