Information Acquisition , Coordination , and Fundamentals in a Financial Crisis ∗

This paper reconciles the two explanations of a financial crisis, the self-fulfilling prophecy and the fundamental causes, in an empirically-relevant framework, by explicitly modeling the costly voluntary acquisition of information about fundamentals in a variant of Diamond and Dybvig (1983). In the “run” equilibrium investors engage in costly evaluation of projects, so that banks with lower-return projects fail. In the “no-run” equilibrium there is no project evaluation. Investors’ coordination on a specific equilibrium is triggered by a self-fulfilling prophecy. So, financial crises are seen as both, fundamentals-based and self-fulfilling prophecies-based phenomena.