Bank runs without self-fulfilling prophecies
This paper proposes that bank runs are unique equilibrium outcomes instead of self-fulfilling prophecies. By assuming that depositors make their withdrawal decisions sequentially, the model provides an equilibrium-selection mechanism in the economy. A bank run would occur if and only if depositors perceive a low return on bank assets. Furthermore, a panic situation arises only when the market information is imperfect. A two-stage variant of the model shows that banks would deliberately offer a demand-deposit contract that is susceptive to bank runs.
|Date of creation:||Dec 2001|
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"Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
[The twin crises: Te causes of banking and balance of payments problems]," MPRA Paper 13842, University Library of Munich, Germany.
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Cowles Foundation Discussion Papers
1336, Cowles Foundation for Research in Economics, Yale University.
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"Equilibrium Bank Runs,"
01-10r, Cornell University, Center for Analytic Economics.
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13709, University Library of Munich, Germany.
- Jianbo Zhang, 1997. "Strategic Delay and the Onset of Investment Cascades," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 188-205, Spring.
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