Run equilibria in the Green–Lin model of financial intermediation

Sequential decisions in the Diamond–Dybvig banking model

“…This assumption follows the literature (Green and Lin, 2003;Andolfatto et al, 2007;Ennis and Keister, 2009b). 11 In this spirit, our paper is no attempt to formally making this sequence endogenous.…”

Do social networks prevent or promote bank runs?

“…Since then, several banks in other developed countries have experienced runs, such as the Bank of East Asia in Hong Kong and Washington Mutual in the US. Run-like phenomena have also occurred in other institutions and markets such as money-market, hedge and pension funds (Baba, McCauley and Ramaswamy, 2009;Du e, 2010), the repo market (Ennis, 2012;Gorton and Metrick, 2011) and even in bank lending (Ivashina and Scharfstein, 2010). Other examples of massive withdrawals in these markets and institutions include the collapse of Bear Stearns, the Lehman experience and the depositors' run on Bankia, one of the biggest banks in Spain.…”

“…macroeconomic shocks, specific industrial conditions, worsening quality of the management) is the other main explanation for the occurrence of bank runs (see for instance Allen and Gale, 1998;Calomiris and Gorton, 1991;Calomiris and Mason, 2003;Gorton, 1988). Ennis (2003) cites examples of bank runs that occured in absence of economic recession and convincingly argues that although historically bank runs have been strongly correlated with deteriorating economic fundamentals, the coordination failure explanation cannot be discarded as a source of bank runs. Gorton and Winton (2003) provide a comprehensive survey on financial intermediation dealing in depth with banking panics.…”

Liquidity uncertainty and intermediation

“…For a review of the literature, see Gorton and Winton (2002). 4 See Cooper and Ross (1998), McCulloch and Yu (1998), Green and Lin (2003), Peck and Shell (2003), Andolfatto et al (2007), Ennis and Keister (2009), Nosal and Wallace (2009), and Ennis and Keister (2011). ting where consumers have corner preferences such that they consume only once in their lifetime, tradable equity contracts are welfare dominant as they provide consumers with optimal risk-sharing opportunities against idiosyncratic consumption shocks without the possibility of default. However, when preferences are assumed to be smooth over time such that different types of consumers have different valuation of consumption at different dates, the restriction that characterises the design of equity contracts which imposes the same wealth to consumers prior to trade in the secondary market, results in a welfare loss in comparison to tailor-made deposit contracts' allocations.…”