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When Prime Depositors Run On The Banks: A Behavioral Approach

Author

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  • Natanael Waraney Gerald Massie

    (Universitas Indonesia)

  • Chaikal Nuryakin

    (Universitas Indonesia)

Abstract

This paper examines the effect of two psychological attributes, namely an individual’s risk and time preference, on withdrawal decisions. Our sample is a pool of prime depositors in Indonesia, mainly due to the country’s deposit market being heavily concentrated on such depositors. We find that most of the prime depositors are risk averse long-term depositors. The regression results show that there is a significant correlation between the decision to withdraw and individual risk and time preference in most economic shock scenarios. The study concludes that a bank-run could happen if the rupiah depreciates by approximately 27% (from Rp 13,436 to Rp 17,000) and when there is a medium or a large bank failure.

Suggested Citation

  • Natanael Waraney Gerald Massie & Chaikal Nuryakin, 2020. "When Prime Depositors Run On The Banks: A Behavioral Approach," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(1), pages 139-152, April.
    • Handle: RePEc:idn:journl:v:23:y:2020:i:1g:p:139-152
    DOI: https://doi.org/10.21098/bemp.v23i1.954
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    Cited by:

    1. Chaikal Nuryakin & Natanael Waraney Gerald Massie, 2018. "Does Deposit Insurance Matter? Behavioral Evidence from Indonesia," LPEM FEBUI Working Papers 201827, LPEM, Faculty of Economics and Business, University of Indonesia, revised 2018.

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    More about this item

    Keywords

    Withdrawal Decision; Time Preference; Risk Preference; Bank Run; Bank Depositor;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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