Asymmetric Information and Financial Crises: A Historical Perspective
Frederic S. Mishkin
This paper examines the nature of financial crises from a historical
perspective using the new and burgeoning literature on asymmetric information
and financial structure. After describing how this literature helps to
understand the nature of financial crises, the paper focuses on a historical
examination of a series of financial crises in the United States, beginning
with the panic of 1857 and ending with the stock market crash of October
19,1987. The asymmetric information approach explains the patterns in the data
and many features of these crises which are otherwise hard to explain. It also
suggests why financial crises have had such important consequences for the
aggregate economy over the past one hundred and fifty years.
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