The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Financial Crisis

  • Charles P. Kindleberger
Reference work entry


A financial crisis is defined as a sharp, brief, ultra-cyclical deterioration of all or most of a group of financial indicators – short-term interest rates, asset (stock, real estate, land) prices, commercial insolvencies and failures of financial institutions (Goldsmith 1982, p. 42). Whereas a boom or bubble is characterized by a rush out of money into real or longer-term financial assets, based on expectations of a continued rise in the price of the asset, financial crisis is characterized by a rush out of the real or long-term financial asset into money, based on the expectation that the price of the asset will decline. Between the boom and a financial crisis may be a period of ‘distress’ in which the expectation of continued price increases has been eroded, but has not given way to the opposite expectation. Distress may be short or protracted, and may or may not end in crisis.

This is a preview of subscription content, log in to check access.


  1. Bagehot, W. 1873. Lombard Street. Reprinted in The collected works of Walter Bagehot, ed. N. St John Stevas. London: The Economist, 1978.Google Scholar
  2. Coombs, C.A. 1976. The arena of international finance. New York: Wiley-Interscience.Google Scholar
  3. Goldsmith, R.W. 1982. Comment on Hyman P. Minsky, The financial instability hypothesis. In Financial crises, theory, history and policy, ed. C.P. Kindleberger and J.-P. Laffargue. Cambridge: Cambridge University Press.Google Scholar
  4. Kindleberger, C.P. 1973. The world in depression, 1929–1939. London: Allen Lane.Google Scholar
  5. Kindleberger, C.P. 1978. Manias, panics and crashes: A history of financial crises. New York: Basic Books.CrossRefGoogle Scholar
  6. Moggridge, D.E. 1982. Policy in the crises of 1920 and 1929. In Financial crises, ed. C.P. Kindleberger and J.-P. Laffargue. Cambridge: Cambridge University Press.Google Scholar
  7. Williamson, J. (ed.). 1983. IMF conditionality. Washington, DC: Institute for International Economics.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Charles P. Kindleberger
    • 1
  1. 1.