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Bank runs via social networks

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Listed:
  • Christopher J. Elias

    (Eastern Michigan University)

Abstract

This paper constructs an agent-based model of a bank run by combining elements from two distinct agent-based modeling frameworks: fractional reserve banking and social networks. A single bank takes deposits from and makes loans to a large number of households. Households form social networks and choose to withdraw their deposits based on the actions of other households within their social networks via threshold modeling mechanisms. A liquidity event occurs if the bank has insufficient funds to satisfy all withdrawal requests. Simulation results suggest that the factors that most impact liquidity events are the type of threshold modeling mechanism employed, the degree of social reach, the incidence of social shifting, and the size of loans made.

Suggested Citation

  • Christopher J. Elias, 2025. "Bank runs via social networks," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 20(4), pages 1045-1066, October.
    • Handle: RePEc:spr:jeicoo:v:20:y:2025:i:4:d:10.1007_s11403-025-00452-4
    DOI: 10.1007/s11403-025-00452-4
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    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D00 - Microeconomics - - General - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • G00 - Financial Economics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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