Bank Runs in Open Economies and The International Transmission of Panics

Peter Garber and Vittorio U. Grilli

No 2764, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we extend the bank run literature to an open economy model. We show that a foreign banking system, by raising deposit rates in the presence of a domestic banking panic, may generate sufficient liquid resources to acquire assets sold by the domestic banking system at bargain prices. In this case, foreign depositors will benefit from the domestic panic. We also show that our simple model is able to generate the spreading of panics. Perhaps not surprisingly, the crucial element in determining the propagation of financial crises is the effect of interest rates on savings decisions.

Date: 1988-11
Note: ITI ME IFM
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Published as Journal of International Economics, Vol. 27, nos. 1/2 (1989): 165-176.

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Related works:
Journal Article: Bank runs in open economies and the international transmission of panics (1989)
Working Paper: BANK RUNS IN OPEN ECONOMIES AND THE INTERNATIONAL TRANSMISSION OF PANICS (1988)
Working Paper: BANK RUNS IN OPEN ECONOMIES AND THE INTERNATIONAL TRANSMISSION OF PANICS (1988)
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