Bank Panics and Fire Sales, Insolvency and Illiquidity
نویسندگان
چکیده
منابع مشابه
Jin Cao: Illiquidity, Insolvency, and Banking Regulation Illiquidity, Insolvency, and Banking Regulation
This paper provides a compact framework for banking regulation analysis in the presence of uncertainty between systemic liquidity and solvency shocks. Extending the work by Cao & Illing (2009a, b), it is shown that systemic liquidity shortage arises endogenously as part of the inferior mixed strategy equilibrium. The paper compares different traditional regulatory policies which intend to fix t...
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Bank liquidity is a crucial determinant of the severity of banking crises. In this paper, we consider the e¤ect of re sales and foreign entry on banksex ante choice of liquid asset holdings, and the ex post resolution of crises. In a setting with limited pledgeability of risky cash ows and di¤erential expertise between banks and outsiders in employing banking assets, the market for assets cl...
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I present a general equilibrium model of banking in which financial crises can be due to panics (i.e., coordination failures that give rise to multiple equilibria) or fundamentals. Crises are systemic, in the sense that many banks are insolvent and subject to runs. A financial crisis is also characterized by a flight to safety-liquidity, and by sales of assets by banks at a depressed price, tha...
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A bank panic is an expectation-driven redemption event that results in a self-fulfilling prophecy of losses on demand deposits. From the standpoint of theory in the tradition of Diamond and Dybvig (1983) and Green and Lin (2003), it is surprisingly diffi cult to generate bank panic equilibria if one allows for a plausible degree of contractual flexibility. A common assumption employed in the st...
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There are two competing theories explaining bank panics. One argues that panics are driven by real shocks, asymmetric information, and concerns about insolvency. The other theory argues that bank runs are self-fulfilling, driven by illiquidity and the beliefs of depositors. This paper tests predictions of these two theories using information uniquely available for the Panic of 1893. The results...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2017
ISSN: 1556-5068
DOI: 10.2139/ssrn.3081147