Preventing (Panic) Bank Runs

Hubert Janos Kiss, Ismael Rodriguez-Lara and Alfonso Rosa-García

No 2213, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: Andolfatto et al. (2017) proposes a mechanism to eliminate bank runs that occur as a coordination problem among depositors (Diamond and Dybvig, 1983). Building on their work, we conduct a laboratory experiment where we offer depositors the possibility to relocate their funds to a priority account. We find evidence that the mechanism reduces not only bank runs that occur because of a coordination problem among depositors but also panic bank runs (Kiss et al., 2018) that occur when depositors can observe the action of others.

Keywords: bank run; coordination problem; panic behavior; experimental economics; policy tools; financial stability (search for similar items in EconPapers)
JEL-codes: C91 D90 G21 G40 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-exp
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Citations: View citations in EconPapers (2)

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Journal Article: Preventing (panic) bank runs (2022)
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