Bank Runs and Policy Interventions under Uncertainty

Jennie Ebihara () and Ryuichiro Izumi

No 2025-004, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: We study how the speed of withdrawals affects bank fragility by examining two dimensions: unpredictability in outflows and frictions in the timing of policy intervention. We extend Ennis and Keister (2009) by introducing uncertainty into the policymaker’s ex-post suspension problem. When withdrawals are more unpredictable, the policymaker intervenes earlier, making the bank less fragile. In contrast, the frequency of intervention opportunities may have a non-monotonic effect: a modest decrease delays suspension and increases fragility, but when opportunities become sufficiently infrequent, the authority suspends earlier to avoid costly delays.

Keywords: Fast bank runs; Suspensions; Ex-post optimal intervention (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2025-05
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mic and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2025-004

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