Sequential decisions in the Diamond-Dybvig banking model

Another Attempt to Explain an Illiquid Banking System: The Diamond and Dybvig Model With Sequential Service Taken Seriously

Introduction to the Special Issue on the Diamond-Dybvig Model

T his special issue of the Economic Quarterly is dedicated to the 1983 model of bank runs developed by Douglas Diamond and Philip Dybvig.1 Their model has been a workhorse of banking research over the last 25 years and during the recent financial crisis it has been one that researchers and policymakers consistently turn to when interpreting financial market phenomena. The Diamond-Dybvig model h...

Government Deposit Insurance and the Diamond - Dybvig Model

The apparent banking market failure modeled by Diamond and Dybvig [1983] rests on their inconsistently applying their " sequential servicing constraint " to private banks but not to their government deposit insurance agency. Without this inconsistency, banks can provide optimal risk-sharing without tax-based deposit insurance, even when the number of " type 1 " agents is stochastic, by employin...

Optimal Intermediated Investment in a Liquidity-Driven Business Cycle∗

A general equilibrium model of a financial intermediary extends the model first introduced by D. Diamond and P. Dybvig (JPE, 1983) to an infinite-horizon environment. This extension enables the relationship between the real business cycle and the composition of assets held in the banking sector to be studied. As in the D-D model, the bank is an optimal financial intermediary coalition here. Mor...

Information revelation in the Diamond-Dybvig banking model

Three recent papers, Green and Lin, Peck and Shell, and Andolfatto et. al., study optima in almost identical versions of the Diamond-Dybvig model. They di¤er about what agents know when they make early withdrawals. We view all three as special cases of a framework in which the planner chooses how much to reveal. It is shown that (i) the Peck-Shell conclusion, the best weakly implementable outco...