The dissertation revolves around stability, especially in the context of financial markets. The first chapter studies the causes of the deterioration of trade conditions in over-the-counter financial markets during a crisis. I employ Regulatory TRACE data on the US Corporate Bonds Market to reveal that the market is notably segmented, with a few dealers dominating the trade in each bond. I establish a correlation between this concentration and a pronounced increase in spreads during a crisis. I claim that dealers take advantage of their customers' acute liquidity needs by imposing higher spreads. I study this claim by calibrating a structural model to the COVID-19 Crisis and the preceding period. The calibrated model implies that alterations in asset composition that intensify adverse selection are crucial for the effect of concentration on spreads. Furthermore, these changes, combined with increased demand for liquidity, may cause the dealer sector to "clog" the market even if dealers are not facing tighter capacity constraints. In the second chapter, I investigate the impact of transient shocks on long-term growth, focusing on their role in shaping the nature of R&D. Using statistics from US Census survey data, I provide evidence indicating that private sector investment in basic research is countercyclical and raises dramatically in downturns. I suggest that weak demand induces firms to transition towards long-term R&D, prompting them to pursue fundamental questions and ultimately fostering technological leaps. I embed the claim into a semi-endogenous growth model in which firms allocate their R&D investment between generating knowledge and applying knowledge to launch new products. I calibrate the model to assess the impact of a transient shock on the trajectory of productivity. In the third chapter, I use a theoretical model to study the impact of inflows of insured depositors on bank failure rates. I show that even a very small number of insured players actively seeking higher interest rates can significantly exacerbate the severity of a banking crisis.