Advanced Search
MyIDEAS: Login

Bank Runs, Deposit Insurance, and Liquidity

Contents:

Author Info

  • Diamond, Douglas W
  • Dybvig, Philip H

Abstract

This article develops a model which shows that bank deposit contracts can provide allocations superior to those of exchange markets, offering an explanation of how banks subject to runs can attract deposits. Investors face privately observed risks which lead to a demand for liquidity. Traditional demand deposit contracts which provide liquidity have multiple equilibria, one of which is a bank run. Bank runs in the model cause real economic damage, rather than simply reflecting other problems. Contracts which can prevent runs are studied, and the analysis shows that there are circumstances when government provision of deposit insurance can produce superior contracts.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://links.jstor.org/sici?sici=0022-3808%28198306%2991%3A3%3C401%3ABRDIAL%3E2.0.CO%3B2-Z&origin=repec
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 91 (1983)
Issue (Month): 3 (June)
Pages: 401-19

as in new window
Handle: RePEc:ucp:jpolec:v:91:y:1983:i:3:p:401-19

Contact details of provider:
Web page: http://www.journals.uchicago.edu/JPE/

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dybvig, Philip H. & Spatt, Chester S., 1983. "Adoption externalities as public goods," Journal of Public Economics, Elsevier, vol. 20(2), pages 231-247, March.
  2. Kareken, John H & Wallace, Neil, 1978. "Deposit Insurance and Bank Regulation: A Partial-Equilibrium Exposition," The Journal of Business, University of Chicago Press, vol. 51(3), pages 413-38, July.
  3. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  4. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
  5. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  6. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  7. Merton, Robert C., 1977. "An analytic derivation of the cost of deposit insurance and loan guarantees An application of modern option pricing theory," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 3-11, June.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Reflections on a Year of Crisis
    by Barry Ritholtz in the big picture on 2009-08-21 14:30:12
  2. De Pablo, cuasimonedas y Hayek: una aclaracion
    by Nicolas Cachanosky in Punto de Vista Economico on 2012-05-21 03:10:24
  3. Financial Crises
    by Stephen Williamson in Stephen Williamson: New Monetarist Economics on 2012-10-19 19:09:00
  4. Lacker and Bernanke
    by Stephen Williamson in Stephen Williamson: New Monetarist Economics on 2013-02-17 22:25:00
  5. Preventing bank runs – a primer
    by ? in Bruegel blog on 2013-04-02 10:58:20
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is featured on the following reading lists or Wikipedia pages:

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ucp:jpolec:v:91:y:1983:i:3:p:401-19

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.