IDEAS home Printed from https://ideas.repec.org/a/sej/ancoec/v734y2007p1112-1132.html
   My bibliography  Save this article

Bank Runs in Emerging-Market Economies: Evidence from Turkey's Special Finance Houses

Author

Listed:
  • Martha A. Starr

    () (Department of Economics, American University)

  • Rasim Yilmaz

    () (Department of Economics, Dumlupinar University)

Abstract

Recent banking crises in emerging-market countries have renewed debates about deposit insurance. Because insurance erodes banks' incentives to manage risks prudently, some argue that its elimination would improve bank stability. Yet eliminating insurance could be de-stabilizing if it recreates risks of self-fulfilling runs. This paper examines dynamics of depositor behavior during a set of runs on Turkey's Special Finance Houses, an uninsured sub-sector of Islamic banks. Detailed data on withdrawals are analyzed in a vector autoregressive framework that enables us to distinguish between informational and self-fulfilling elements of runs. We found that both types of dynamics were at work during the runs, suggesting a role for deposit insurance, judiciously used, in ruling out expectational problems that fuel tendencies to run.

Suggested Citation

  • Martha A. Starr & Rasim Yilmaz, 2007. "Bank Runs in Emerging-Market Economies: Evidence from Turkey's Special Finance Houses," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 1112-1132, April.
  • Handle: RePEc:sej:ancoec:v:73:4:y:2007:p:1112-1132
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ahmad, Ausaf, 1994. "Contemporary Practices Of Islamic Financing Techniques," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 1, pages 15-52.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    3. Demirguc-Kunt, Asli & Detragiache, Enrica, 2002. "Does deposit insurance increase banking system stability? An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1373-1406, October.
    4. Charles W. Calomiris & Gary Gorton, 1991. "The Origins of Banking Panics: Models, Facts, and Bank Regulation," NBER Chapters,in: Financial Markets and Financial Crises, pages 109-174 National Bureau of Economic Research, Inc.
    5. Jacklin, Charles J & Bhattacharya, Sudipto, 1988. "Distinguishing Panics and Information-Based Bank Runs: Welfare and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 568-592, June.
    6. Gorton, Gary, 1988. "Banking Panics and Business Cycles," Oxford Economic Papers, Oxford University Press, vol. 40(4), pages 751-781, December.
    7. Samartin, Margarita, 2003. "Should bank runs be prevented?," Journal of Banking & Finance, Elsevier, vol. 27(5), pages 977-1000, May.
    8. Omar Farooq, Mohammad, 2014. "Islamic Wealth Management and the Pursuit of Positive-Sum Solutions," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 22, pages 99-124.
    9. Schumacher, Liliana, 2000. "Bank runs and currency run in a system without a safety net: Argentina and the 'tequila' shock," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 257-277, August.
    10. repec:idb:wpaper:321 is not listed on IDEAS
    11. Liliana Rojas-Suárez & Steven R. Weisbrod, 1996. "Banking Crises in Latin America: Experience and Issues," IDB Publications (Working Papers) 6209, Inter-American Development Bank.
    12. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2004. "Financial development and the instability of open economies," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1077-1106, September.
    13. Presley, John R & Sessions, John G, 1994. "Islamic Economics: The Emergence of a New Paradigm," Economic Journal, Royal Economic Society, vol. 104(424), pages 584-596, May.
    14. Yehning Chen, 1999. "Banking Panics: The Role of the First-Come, First-Served Rule and Information Externalities," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 946-968, October.
    15. Liliana Rojas-Suárez & Steven R. Weisbrod, 1996. "Banking Crises in Latin America: Experience and Issues," IDB Publications (Working Papers) 6859, Inter-American Development Bank.
    16. Aggarwal, Rajesh K & Yousef, Tarik, 2000. "Islamic Banks and Investment Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 93-120, February.
    17. V.V. Chari & Ravi Jagannathan, 1984. "Banking Panics," Discussion Papers 618, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    18. Abdel-Fattah A.A. Khalil & Colin Rickwood & Victor Murinde, 2002. "Evidence on agency-contractual problems in mudarabah financing operations by Islamic banks," Chapters,in: Islamic Banking and Finance, chapter 4 Edward Elgar Publishing.
    19. Chari, V V & Jagannathan, Ravi, 1988. " Banking Panics, Information, and Rational Expectations Equilibrium," Journal of Finance, American Finance Association, vol. 43(3), pages 749-761, July.
    20. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
    21. S. Rao Aiyagari, 1988. "Banking panics, information, and rational expectations equilibrium," Working Papers 320, Federal Reserve Bank of Minneapolis.
    22. Khan, Mohsin S & Mirakhor, Abbas, 1990. "Islamic Banking: Experiences in the Islamic Republic of Iran and in Pakistan," Economic Development and Cultural Change, University of Chicago Press, vol. 38(2), pages 353-375, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kiss, Hubert J. & Rodriguez-Lara, Ismael & Rosa-Garcia, Alfonso, 2014. "Do women panic more than men? An experimental study of financial decisions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 52(C), pages 40-51.
    2. Kiss, H.J. & Rodriguez-Lara, I. & Rosa-García, A., 2016. "Think twice before running! Bank runs and cognitive abilities," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 64(C), pages 12-19.
    3. Kinateder, Markus & Kiss, Hubert János, 2014. "Sequential decisions in the Diamond–Dybvig banking model," Journal of Financial Stability, Elsevier, vol. 15(C), pages 149-160.
    4. Alfonso Rosa García & Hubert Janos Kiss & Ismael Rodríguez Lara, 2009. "Do social networks prevent bank runs?," Working Papers. Serie AD 2009-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Kiss, Hubert János & Rodriguez-Lara, Ismael & Rosa-García, Alfonso, 2015. "Kognitív képességek és stratégiai bizonytalanság egy bankrohamkísérletben
      [Cognitive abilities and strategic uncertainty in a bank-run experiment]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1030-1047.
    6. Ahmet F. Aysan & Mustafa Disli & Meryem Duygun & Huseyin Ozturk, 2017. "Islamic Banks, Deposit Insurance Reform, and Market Discipline: Evidence from a Natural Framework," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(2), pages 257-282, April.
    7. David Csercsik & Hubert Janos Kiss, 2016. "Optimal payments to connected depositors in turbulent times-a Markov chain approach," IEHAS Discussion Papers 1609, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    8. repec:eee:ecolet:v:162:y:2018:i:c:p:146-149 is not listed on IDEAS
    9. Xavier Vives, 2014. "Strategic Complementarity, Fragility, and Regulation," Review of Financial Studies, Society for Financial Studies, vol. 27(12), pages 3547-3592.
    10. Carlos Garriga & Chao Gu, 2012. "Withdrawal history, private information, and bank runs," Review, Federal Reserve Bank of St. Louis, issue July, pages 305-320.
    11. Sümeyra Atmaca & Koen Schoors & Marijn Verschelde, 2016. "Bank Loyalty, Social Networks And Crisis," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 16/923, Ghent University, Faculty of Economics and Business Administration.
    12. Gu, Chao, 2011. "Herding and bank runs," Journal of Economic Theory, Elsevier, vol. 146(1), pages 163-188, January.
    13. Markus Kinateder & Hubert Janos Kiss & Agnes Pinter, 2015. "Would depositors like to show others that they do not withdraw? Theory and Experiment," IEHAS Discussion Papers 1553, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    14. Kiss, Hubert Janos & Rodriguez-Lara, Ismael & Rosa-García, Alfonso, 2014. "Do social networks prevent or promote bank runs?," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 87-99.
    15. Martin Dufwenberg, 2014. "Banking on Experiments?," Working Papers 534, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Karlo Kauko, 2016. "Does Opaqueness Make Equity Capital Expensive for Banks?," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, vol. 17(2), pages 203-227, February.
    17. Kiss, Hubert J. & Rodriguez-Lara, Ismael & Rosa-Garcia, Alfonso, 2018. "Panic bank runs," Economics Letters, Elsevier, vol. 162(C), pages 146-149.
      • Hubert Janos Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2017. "Panic bank runs," IEHAS Discussion Papers 1710, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sej:ancoec:v:73:4:y:2007:p:1112-1132. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Razzolini). General contact details of provider: http://edirc.repec.org/data/seaaaea.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.