Skip to main content Skip to main content
SHARE   Share on Twitter Share on Facebook Share on LinkedIn Email

Bank runs without sequential service

Banking models in the tradition of Diamond and Dybvig (1983) rely on sequential service to explain belief driven runs. But the run-like phenomena witnessed during the …nancial crisis of 2007–08 occurred in the wholesale shadow banking sector where sequential service is largely absent. This suggests that something other than sequential service is needed to help explain runs. We show that in the absence of sequential service runs can easily occur whenever bank-funded in- vestments are subject to increasing returns to scale consistent with available evidence. Our framework is used to understand and evalu- ate recent banking and money market regulations.

Read Full Text

https://doi.org/10.20955/wp.2018.016


Subscribe to our newsletter


Follow us

Twitter logo Google Plus logo Facebook logo YouTube logo LinkedIn logo
Back to Top