Bank collapse and depression
The recurrent banking panics of the 19th century and the Great Depression of the 1930s are widely viewed as failures of our economic system. A simple version of Samuelson’s overlapping generations model is used to generate such failures of Walrasian equilibrium. The spontaneous “panics” generated involve a collapse of bank credit, causing in turn a drop in investment demand. The model suggests that both the recent technological advances in the intermediation industry and the current move towards deregulation of that industry are ominous developments.
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- David Cass & Menahem E. Yaari, 1966.
"A Re-examination of the Pure Consumption Loans Model,"
Journal of Political Economy,
University of Chicago Press, vol. 74, pages 353.
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- Bryant, John, 1978. "An Annotation of "Implicit Contracts and Underemployment Equilibria."," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1159-60, December.
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