The on-going financial crisis continues to expose the limits of our collective knowledge and thereby motivate new avenues of research for academics, practitioners and policymakers and perhaps none more so than those that lie at the intersection of monetary and financial economics. As has been well documented, the origins of the crisis go back to problems in the US sub-prime market that became increasingly clear in the early part of 2007 and culminated in the announcement by BNP Paribas on 9 August 2007 of the suspension of a number of funds as it was no longer possible to value their assets. The BNP Paribas statement was a reflection of the fact that by that summer liquidity had all but evaporated in many securitised lending markets. But the statement itself triggered a further collapse in liquidity in many other markets and also a break-down in interbank lending markets. And what started as a liquidity crisis soon became a credit crisis as it became increasingly apparent that risk in many capital markets had been underpriced and that consequently much of the private sector was carrying too much debt, with many parts of the financial sector leveraged to an untenable degree. Subsequently, at various points in the crisis the very financial network itself seemed threatened with extinction, most notably after the collapse of Lehman Brothers in September 2008. Eventually, the interaction between banking and sovereign risk led to increasing spreads on government debt in many countries and full-blown sovereign debt crises in a number of euro area countries.