|
EconStor >
Federal Reserve Bank of New York >
Staff Reports, Federal Reserve Bank of New York >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/60639
|
| | |
| Title: | | Commitment and equilibrium bank runs  |
| Authors: | | Ennis, Huberto M. Keister, Todd |
| Issue Date: | | 2007 |
| Series/Report no.: | | Staff Report, Federal Reserve Bank of New York 274 |
| Abstract: | | We study the role of commitment in a version of the Diamond and Dybvig (JPE, 1983) model with no aggregate uncertainty. As is well known, the banking authority can eliminate the possibility of a bank run by committing to suspend payments to depositors if a run were to start. We show, however, that in an environment without commitment, the banking authority will choose to only partially suspend payments during a run. In some cases, the reduction in early payouts under this partial suspension is insufficient to dissuade depositors from participating in the run. Bank runs can then occur with positive probability in equilibrium. The fraction of depositors participating in such a run is stochastic and can be arbitrarily close to one. |
| Subjects: | | banking panics, suspension of convertibility, time consistency |
| JEL: | | G21 E61 G28 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Staff Reports, Federal Reserve Bank of New York
|
| |
| | |
Download bibliographical data as:
BibTeX
|
| |
Share on:http://hdl.handle.net/10419/60639
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|