Money Runs

Jason Donaldson and Giorgia Piacentino

No 13955, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Keywords: Banking; Private money; Financial fragility; Demandable debt (search for similar items in EconPapers)
JEL-codes: E40 G21 G32 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP13955 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13955

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13955

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().