Bank Runs In Open Economies And The International Transmission Of Panics
AbstractIn this paper, we extend the bank run literature to an open economy model. We show that a foreign banking system, by raising deposit rates in the presence of a domestic banking panic, may generate sufficient liquid resources to acquire assets sold by the domestic banking system at bargain prices. In this case, foreign depositors will benefit from the domestic panic. We also show that our simple model is able to generate the spreading of panics. Perhaps not surprisingly, the crucial element in determining the propagation of financial crises is the effect of interest rates on savings decisions.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 122.
Length: 17 pages
Date of creation: 1988
Date of revision:
Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
international economy ; banking;
Other versions of this item:
- Garber, Peter M. & Grilli, Vittorio U., 1989. "Bank runs in open economies and the international transmission of panics," Journal of International Economics, Elsevier, Elsevier, vol. 27(1-2), pages 165-175, August.
- Garber, P.M. & Grilli, V., 1988. "Bank Runs In Open Economies And The International Transmission Of Panics," Papers, Yale - Economic Growth Center 552, Yale - Economic Growth Center.
- Peter M. Garber & Vittorio U. Grilli, 1988. "Bank Runs in Open Economies and The International Transmission of Panics," NBER Working Papers 2764, National Bureau of Economic Research, Inc.
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.:
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- Miller, V., 1998. "Domestic bank runs and speculative attacks on foreign currencies," Journal of International Money and Finance, Elsevier, Elsevier, vol. 17(2), pages 331-338, April.
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