Preventing Bank Runs

Andolfatto, David; Nosal, Ed; Sultanum, Bruno

doi:10.2139/ssrn.2474839

Cited by 3 publications

(8 citation statements)

References 14 publications

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“…I exemplify this possibility in a bank model built on the Diamond and Dybvig (1983) literature. Specifically, I use the model in Andolfatto et al (2017).…”

Section: Discussionmentioning

confidence: 99%

“…To better understand how information changes agents' incentives, I consider a generalized version of Green and Lin (2003) along the lines of Andolfatto et al (2017).…”

Section: Environmentmentioning

confidence: 99%

“…Agents take action in sequence according to a queue, which the literature refers to as the sequential service constraint. Following the notation in Andolfatto et al (2017), a queue is a vector t N = (t 1 , . .…”

Section: Environmentmentioning

confidence: 99%

“…The problem described here is the same as in Section 3 of Andolfatto et al (2017). Under the bank information structure, each agent k makes an announcement m k (t k ) ∈ M as a function of his type t k .…”

Section: The Bank Information Structurementioning

confidence: 99%

“…Building also on the bank model of Green and Lin (2003), I illustrate this point using a variation of their model with only a small change to preferences and the distribution of shocks. These changes can be understood as a generalization of Green and Lin (2003) and follow more closely Andolfatto et al (2017). I then compare two versions of the model-one in which depositors observe the redemption decisions of other depositors and one in which they do not observe.…”

Section: Introductionmentioning

confidence: 99%

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The Cost of Information in the Blockchain: A Discussion of Routledge and Zetlin-Jones (2018)

Sultanum¹

2021

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The volatility of crypto currencies hinders their ability to be media of exchange or stores of value, leading to the implementation of exchange-rate pegs in an attempt to stabilize these currencies. This strategy has been used by crypto currencies such as US Dollar Tether, Steem Backed Dollar and TrueUSD; and was previously adopted in countries such as Brazil, Mexico and Argentina. However, an exchangerate peg is vulnerable to speculative attacks if it is not 100% backed by reserves, as discussed in Obstfeld (1996). Using insights from the bank-run literature, Routledge and Zetlin-Jones (2018) build on Green and Lin (2003) and propose a model of speculative attacks. They show that adjustments to the exchange rate can prevent speculative attacks in equilibrium. They also show how to implement such contracts using blockchain technology. In this discussion paper, I provide a cautionary tale. I show also in a version of Green and Lin (2003) that the information content in the blockchain prevents agents from attaining all the gains from risk sharinghighlighting the downsides of too much public information.

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“…I exemplify this possibility in a bank model built on the Diamond and Dybvig (1983) literature. Specifically, I use the model in Andolfatto et al (2017).…”

Section: Discussionmentioning

confidence: 99%

“…To better understand how information changes agents' incentives, I consider a generalized version of Green and Lin (2003) along the lines of Andolfatto et al (2017).…”

Section: Environmentmentioning

confidence: 99%

Section: Environmentmentioning

confidence: 99%

Section: The Bank Information Structurementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Cost of Information in the Blockchain: A Discussion of Routledge and Zetlin-Jones (2018)

Sultanum¹

2021

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When Prime Depositors Run on the Banks: A Behavioral Approach

Massie

Nuryakin

2020

BEMP

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This paper examines the effect of two psychological attributes, namely an individual’srisk and time preference, on withdrawal decisions. Our sample is a pool of primedepositors in Indonesia, mainly due to the country’s deposit market being heavilyconcentrated on such depositors. We find that most of the prime depositors are riskaverse long-term depositors. The regression results show that there is a significantcorrelation between the decision to withdraw and individual risk and time preferencein most economic shock scenarios. The study concludes that a bank-run could happenif the rupiah depreciates by approximately 27% (from Rp 13,436 to Rp 17,000) andwhen there is a medium or a large bank failure.

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Money Runs

Donaldson¹,

Piacentino²

2019

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We develop a model in which, as in practice, bank debt is both a financial security used to raise funds and a kind of money used to facilitate trade. This dual role of bank debt provides a new rationale for why banks do what they do. In the model, banks endogenously perform the essential functions of real-world banks: they transform liquidity, transform maturity, pool assets, and have dispersed depositors. Moreover, they make their debt redeemable on demand. Thus, they are endogenously fragile. We show novel effects of narrow banking, suspension of convertibility, and some other policies.

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Preventing Bank Runs

Cited by 3 publications

References 14 publications

The Cost of Information in the Blockchain: A Discussion of Routledge and Zetlin-Jones (2018)

The Cost of Information in the Blockchain: A Discussion of Routledge and Zetlin-Jones (2018)

When Prime Depositors Run on the Banks: A Behavioral Approach

Money Runs

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