Keep Calm and Bank On: Panic-Driven Bank Runs and the Role of Public Communication

Damiano Sandri, Francesco Grigoli (), Yuriy Gorodnichenko and Olivier Coibion

No 18448, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using a survey with information treatments conducted in the aftermath of SVB’s collapse, we study households’ perspectives on bank stability, the potential for panic-driven bank runs, and the role of public communication. When informed about SVB’s collapse, households become more likely to withdraw deposits, due to both a higher perceived risk of bank failure and higher expected losses on deposits in case of bank failure. Leveraging hypothetical questions and the exogenous variation in beliefs generated by the information treatments, we show that households reallocate deposit withdrawals primarily into other banks and cash, with little passthrough into spending. Information about FDIC insurance and communication about bank stability by the Federal Reserve can reassure depositors, while communication from political leaders only influences their electoral base.

Keywords: Bank runs; public communication; Information treatments (search for similar items in EconPapers)
JEL-codes: E21 E58 G21 (search for similar items in EconPapers)
Date: 2023-09
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Related works:
Working Paper: Keep calm and bank on: panic-driven bank runs and the role of public communication (2023)
Working Paper: Keep Calm and Bank On: Panic-Driven Bank Runs and the Role of Public Communication (2023)
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