![]() ![]() Financial crises are a common and fairly constant feature of the economic cycle, as Bordo et al (2001) show. These include asset-price bubbles, exchange-rate collapses, and a host of other phenomena. Severe waves of bank failures that result in aggregate negative net worth of failed banks in excess of 1% of GDP.īanking crises are a distinct subset within the broader set of phenomena known as financial crises.Panics, moments of temporary confusion about the unobservable incidence across the financial system of observable aggregate shocks or.This column, based on Calomiris (2009a, b), covers the historical lessons for today’s crisis. The point has been stressed more recently by Carmen Reinhart (2008) in her Vox column “ Eight hundred years of financial folly." Charles Kindleberger (1973) and Hyman Minsky (1975) were prominent and powerful advocates of this view, where banking crises result from the propensities of market participants for irrational reactions and myopic foresight. ![]() Pundits, policymakers, and macroeconomists often remind us that banking crises are nothing new, an observation sometimes used to argue that crises are inherent to the business cycle or perhaps human nature itself. ![]()
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