Financial Crises

22 Pages Posted: 11 May 2018

See all articles by Gary B. Gorton

Gary B. Gorton

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

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Date Written: January 30, 2018


Financial crises are runs on short-term debt. Whatever its form, short-term debt is an inherent feature of a market economy. A run is an information event in which holders of short-term debt no longer want to lend to banks because they receive information leading them to suspect the value of the backing for the debt, so they run. When runs are system-wide they threaten the solvency of the entire financial system requiring either public or private intervention. Runs, which most likely follow credit booms, are integral parts of movements in the macro-economy.

Suggested Citation

Gorton, Gary B., Financial Crises (January 30, 2018). Yale ICF Working Paper No. 2018-11, Available at SSRN: or

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