anticipated banking panics

Andrea Prestipino, Nobuhiro Kiyotaki and Mark Gertler
Additional contact information
Andrea Prestipino: Federal Reserve Board
Nobuhiro Kiyotaki: Princeton University

No 430, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: In the Great Recession, a gradual weakening of the banking system induced a kind of slow run on shadow banks that culminated in an overall collapse following the Lehmann Brothers bankruptcy. We develop a macroeconomic model with banking and bank runs that captures this slow run behavior and the transition to fast runs. In the model, a weakening of banks' balance sheets leads agents to rationally increase their assessment of the probability of a run and hence to withdraw funds from the financial system. These slow runs have harmful effects on the economy and set the stage for fast runs.

Date: 2016
New Economics Papers: this item is included in nep-dge and nep-mon
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Citations: View citations in EconPapers (9)

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Journal Article: Anticipated Banking Panics (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:430

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