Santos-Arteaga, Francisco Javier (2010) Bank Runs Without Sunspots. [Working Paper or Technical Report]
Official URL: http://eprints.ucm.es/10444
The literature on bank runs reduces all coordination mechanisms triggering attacks on banks to exogenous sunspots. We present a general equilibrium version of these models where the uncertainty faced by depositors is modeled explicitly, such that bank runs arise as optimal equilibrium outcomes corresponding to Bayesian coordination games played by rational agents before depositing. Differentials in information sets between the bank and its depositors lead to rational self-contained equilibrium runs. The coexistence of different beliefs in equilibrium jointly with the self-fulfilling nature of the attacks follow from Adam Smith's invisible hand principle. The runs obtained do not violate the revelation principle.
|Item Type:||Working Paper or Technical Report|
|Uncontrolled Keywords:||Bank Runs, Self-contained Attacks, Bayesian Coordination Games, Revelation Principle, Invisible Hand Principle|
|Subjects:||Social sciences > Economics > Econometrics|
Social sciences > Economics > Stock exchanges
Social sciences > Economics > Banks and credit unions
|Series Name:||Working Papers|
Adao, B. and T. Temzelides, “Sequential Equilibrium and Competition in a Diamond-Dybvig Banking Model”, Review of Economic Dynamics, 1, (1998), 859-877.
Alonso, Irasema, “Truthful Revelation in the Diamond and Dybvig Banking Environment”, Journal of Monetary Economics, 37, (1996), 73-87.
Calvo, G. A. and E. G. Mendoza, “Rational Contagion and the Globalization of Securities Markets”, Journal of International Economics, 51, (2000), 79-113.
Chari, V.V. and R. Jagannathan. “Banking Panics, Information, and Rational Expectations Equilibrium”, Journal of Finance, 43, (1988), 749-761.
Cole, H.L. and T. Kehoe. “Self-Fulfilling Debt Crises”, Review of Economic Studies, 67 (1), (2000), 91-116.
Diamond, D. and P. Dybvig. “Bank Runs, Deposit Insurance, and Liquidity”, Journal of Political Economy, 91, (1983), 401-419.
Furman, J. and J.E. Stiglitz. “Economic Crises: Evidence and Insights from East Asia”, Brookings Papers on Economic Activity, 2, (1998), 1-135.
Green, E.J. and P. Lin. “Diamond and Dybvig's Classic Theory of Financial Intermediation: What's Missing?” Federal Reserve Bank of Minneapolis Quarterly Review, 24, (Winter 2000), 3-13.
Green, E.J. and P. Lin. “Implementing Efficient Allocations in a Model of Financial Intermediation”, Journal of Economic Theory, 109, (2003), 1-23.
Jacklin, Charles. Demand Deposits, “Trading Restrictions, and Risk Sharing”, In: Contractual Arrangements for Intertemporal Trade, ed. Edward C. Prescott and Neil Wallace, pp. 26-47. Minnesota Studies in Macroeconomics, Vol. 1. University of Minnesota Press, (1987).
Jacklin, C. and S. Bhattacharya. “Distinguishing Panics and Information-based Bank Runs: Welfare and Policy Implications”, Journal of Political Economy, 96, (1988), 568-592.
Kaminsky, G.L. and C.M. Reinhart. “The Twin Crises: The Causes of Banking and Balance-Of-Payments Problems”, American Economic Review, 89, (June 1999), 473-500.
Kahneman, D. and A. Tversky. “Prospect Theory - Analysis of Decision under Risk”, Econometrica, 47 (2), (1979), 263-291.
Krasa, S. and A.P. Villamil. “Monitoring the Monitor. An Incentive Structure for a Financial Intermediary”, Journal of Economic Theory, 57, (June 1992), 197-221.
Krugman, Paul. “A Model of Balance-of-Payments Crises”, Journal of Money, Credit, and Banking, 11, (1979), 311-325.
Morris, S. and H.S. Shin. “Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks”, American Economic Review, 88, (June 1998), 587-597.
Obstfeld, Maurice. “The Logic of Currency Crises”, Cahiers Economiques et Monetaires (Banque de France), 43, (1994), 189-213.
Peck, J. and K. Shell. “Equilibrium Bank Runs”, Journal of Political Economy, 111, (2003), 103-123.
Postlewaite, A. and X. Vives. “Bank Runs as an Equilibrium Phenomenon”, Journal of Political Economy, 95, (1987), 485-491.
Samartin, Margarita. “Should Bank Runs be Prevented?”, Journal of Banking and Finance, 27, (2003), 977- 1000.
Tversky, A. and D. Kahneman. “Advances in Prospect Theory - Cumulative Representation of Uncertainty”, Journal of Risk and Uncertainty, 5 (4), (1992), 297-323. 29
|Deposited On:||27 Apr 2010 12:30|
|Last Modified:||01 Apr 2011 14:02|
Repository Staff Only: item control page