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Bank Runs and Policy Interventions under Uncertainty

Author

Listed:
  • Jennie Ebihara
  • Ryuichiro Izumi

    (Department of Economics, Wesleyan University)

Abstract

We study how the speed of withdrawals affects bank fragility by examining two dimensions: unpredictability in outflows and frictions in the timing of policy intervention. We extend Ennis and Keister (2009) by introducing uncertainty into the policymaker’s ex-post suspension problem. When withdrawals are more unpredictable, the policymaker intervenes earlier, making the bank less fragile. In contrast, the frequency of intervention opportunities may have a non-monotonic effect: a modest decrease delays suspension and increases fragility, but when opportunities become sufficiently infrequent, the authority suspends earlier to avoid costly delays.

Suggested Citation

  • Jennie Ebihara & Ryuichiro Izumi, 2025. "Bank Runs and Policy Interventions under Uncertainty," Wesleyan Economics Working Papers 2025-004, Wesleyan University, Department of Economics.
    • Handle: RePEc:wes:weswpa:2025-004
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    File URL: http://repec.wesleyan.edu/pdf/rizumi/2025004_izumi.pdf
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    More about this item

    Keywords

    Fast bank runs; Suspensions; Ex-post optimal intervention;
    All these keywords.

    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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