Demand - Deposit Contracts And The Probability of Bank Runs  

Oleh:

Goldstein, Itay ; Pauzner, Ady

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 60 no. 3 (Jun. 2005), page 1293-1328.
Topik: demand; studies; demand deposit accounts; equilibrium; mathematical models; liquidity; risk sharing
Fulltext: p 1293.pdf (285.6KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

Diamond and Dybvig (1983) show that while demand - deposit contracts let banks provide liquidity, they expose them to panic - based bank runs. However, their model does not provide tools to derive the probability of the bank - run equilibrium, and thus cannot determine whether banks increase welfare overall. We study a modified model in which the fundamentals determine which equilibrium occurs. This lets us compute the ex ante probability of panic - based bank runs and relate it to the contract. We find conditions under which banks increase welfare overall and construct a demand - deposit contract that trades off the benefits from liquidity against the costs of runs.

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