Financial crises and coordination failure: A comment

The three papers of this session link financial crises (explicitly or implicitly) to coordination failure. In Bryant (Journal of Banking and Finance, 2002), the possibility of coordination failure is due to complementarity in the productive technology. In Chui et al. (Journal of Banking and Finance, 2002), foreign lenders to a small country fail to coordinate on the optimal strategy rolling over short-term loans. Finally, Amable et al. (Journal of Banking and Finance, 2002) implicitly introduce coordination failure through a production function with external increasing returns to scale. This sort of “thick markets” externality can be viewed as a reduced form that stands for coordination problems in a non-Walrasian economy.