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Sudden financial arrest

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Ricardo J. Caballero1 editions

There are striking and terrifying similarities between the sudden failure of a heart and that of a financial system. In the medical literature, the former is referred to as a sudden cardiac arrest (SCA). By analogy, I refer to its financial counterpart as a sudden financial arrest (SFA). In this article I describe SFA and its treatment guided by its medical counterpart. Keywords: Financial crisis, panic, defibrillation, complexity, Knightian uncertainty, moral hazard, financial network, capital requirements, contingent capital, contingent insurance, IMF. JEL Classifications: E32, E44, E58, F30, G01, G20.

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  • Ricardo J. Caballero

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