Bis Working Papers Bank Runs without Self-fulfilling Prophecies Monetary and Economic Department
نویسنده
چکیده
This paper proposes that bank runs are unique equilibrium outcomes instead of self-fulfilling prophecies. By assuming that depositors make their withdrawal decisions sequentially, the model provides an equilibrium-selection mechanism in the economy. A bank run would occur if and only if depositors perceive a low return on bank assets. Furthermore, a panic situation arises only when the market information is imperfect. A two-stage variant of the model shows that banks would deliberately offer a demand-deposit contract that is susceptive to bank runs. JEL Classification Numbers: G21, G14, C7
منابع مشابه
José Manuel González-Páramo: Monetary and fiscal policies in times of crisis
The economic literature provides useful insights into the nature and causes of the current crisis. I am thinking in particular of the literature highlighting the fragility of equilibria and the possibility of self-fulfilling prophecies. A literature that includes the seminal work of Diamond and Dybvig (1983) on bank runs, which has inspired a large number of papers dealing with financial crises...
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BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The views expressed in them are those of their authors and not necessarily the views of the BIS. Limited extracts may be reproduced or translated provided the source is stated.
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