This chapter surveys the literature on bubbles, financial crises, and systemic risk. The first
part of the chapter provides a brief historical account of bubbles and financial crisis. The …

We review theory and evidence relating to herd behaviour, payoff and reputational
interactions, social learning, and informational cascades in capital markets. We offer a …

The introduction of a central bank digital currency (CBDC) allows the central bank to engage
in large-scale intermediation by competing with private financial intermediaries for deposits …

Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in
three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse …

The second edition of an essential text on the microeconomic foundations of banking
surveys the latest research in banking theory, with new material that covers recent …

We develop a structural empirical model of the US banking sector. Insured depositors and
run-prone uninsured depositors choose between differentiated banks. Banks compete for …

Demandable-debt finance by banks warrants explanation because it entails costs of bank
suspension, liquidation, and idle reserve holdings. An explanation is developed in which …

This paper briefly describes recent papers on the economics of rational herding in financial
markets. Some models can predict perfect herding, in which rational agents all act alike …

When IPO shares are sold sequentially, later potential investors can learn from the
purchasing decisions of earlier investors. This can lead rapidly to “cascades” in which …

We examine historical banking crises through the lens of bank equity declines, which cover
a broad sample of episodes of banking distress with and without banking panics. To do this …