In this study, I examine the impact of diversity (ethnic & religious fractionalization and polarization) on banking stability in Sub-Saharan Africa (SSA). Using data from 1996 to 2014, I employ the system Generalized Method of Moments (sys-GMM) approach to examine this relationship. I find that...

It is known that sunspots can trigger panic-based bank runs and that the optimal banking contract can tolerate panic-based runs. The existing literature assumes that these sunspots are based on a publicly observed extrinsic randomizing device. In this paper, I extend the analysis of panic-based...

Traditional models of bank runs do not allow for herding effects, because in these models withdrawal decisions are assumed to be made simultaneously. I extend the banking model to allow a depositor to choose his withdrawal time. When he withdraws depends on his liquidity type (patient or...

In addition to their direct effects, episodes of financial instability may decrease investor confidence. Measuring the impact of a crisis on investor confidence is complicated by the fact that it is difficult to disentangle the effect of investor confidence from coincident direct effects of the...

We survey the theories of why banks promise to pay par on demand and examine evidence about the conditions under which banks have promised to pay the par value of deposits and banknotes on demand when holding only fractional reserves. The theoretical literature can be broadly divided into four...

The paper analyses problems arising from the interdependence of liquidity provision in the financial system. Findings document, that liquidity shortage of minor financial players can translate into liquidity shortage for systemic relevant players, thereby putting the proper functioning of the...

We estimate time series of option implied Probabilities of Default (PoDs) for 19 major US financial institutions from 2002 to 2012. These PoDs are estimated as mass points of entropy based risk neutral densities and subsequently corrected for maturity dependence. The ob- tained time series are...

The weakness of the Japanese banking industry, suffering from acute problem of non-performing loans, prevents Japan from restoring sound growth rates despite having undertaken structural reforms and substantial fiscal policy efforts, and, through impairing transmission channels of monetary...

Credit risk associated with interbank lending may lead to domino effects, where the failure of one bank results in the failure of other banks not directly affected by the initial shock. Recent work in economic theory shows that this risk of contagion depends on the precise pattern of interbank...