This paper reviews the literature on financial crises focusing on three specific aspects. First,
what are the main factors explaining financial crises? Since many theories on the sources of …

The recent crisis was characterized by massive illiquidity. This paper reviews what we know
and don't know about illiquidity and all its friends: market freezes, fire sales, contagion, and …

I develop a highly tractable general equilibrium model in which heterogeneous producers
face collateral constraints, and study the effect of financial frictions on capital misallocation …

This paper analyses the possibility and the consequences of rational bubbles in a dynamic
economy where financially constrained firms demand and supply liquidity. Bubbles are more …

China's housing prices have been growing nearly twice as fast as national income over the
past decade, despite a high vacancy rate and a high rate of return to capital. This paper …

We develop a stylized model of economic growth with bubbles in which changes in investor
sentiment lead to the appearance and collapse of macroeconomic bubbles or pyramid …

Two leading economists develop a theory explaining the demand for and supply of liquid
assets. Why do financial institutions, industrial companies, and households hold low …

We take an off-the-shelf model with financial frictions and heterogeneity, and study the
mapping from a credit crunch, modeled as a shock to collateral constraints, to simple …

Macro developments leading up to the 2008 crisis displayed an unprecedented degree of
international synchronization. Before the crisis, all G7 countries experienced credit growth …

The key ideas for adding financial market frictions in general equilibrium models are not new
in macroeconomics. However, it is only with the recent crisis that the profession has fully …