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Perotti, Enrico C.; Matta, Rafael - 2015 - This Draft: March 16, 2015

Does demand for safety create instability ? Secured (repo) funding can be made so safe that it never runs, but shifts …. As more secured debt causes larger fire sales, it leads to higher haircuts which further increase the frequency of runs …. While secured funding combined with high yield unsecured debt may reduce instability, the private choice of repo funding …

Persistent link: https://www.econbiz.de/10010492342

Liquidity creation without banks

Kucinskas, Simas - 2015

I revisit the Diamond-Dybvig model of liquidity insurance in the presence of hidden trades. The key result is that in this environment deposit-taking banks are not necessary for the efficient provision of liquidity. Mutual funds are constrained efficient when supplemented with the same...

Persistent link: https://www.econbiz.de/10011327337

Contagious bank runs : experimental evidence

Brown, Martin; Trautmann, Stefan T.; Vlahu, Razvan - 2012

We conduct a laboratory experiment to examine under which circumstances a depositor-run at one bank may lead to a depositor-run at another bank. We implement two-person coordination games which capture the essence of the Diamond-Dybvig (1983) bank-run model. Subjects in the roles of followers...

Persistent link: https://www.econbiz.de/10010407054

Cybersecurity and financial stability

Anand, Kartik; Duley, Chanelle; Gai, Prasanna - 2022

Cyber attacks can impair banks operations and precipitate bank runs. When digital infrastructure is shared, banks defend themselves by investing in cybersecurity but can free-ride on the security measures of others. Ex ante free-riding by banks interacts with the ex post coordination frictions...

Persistent link: https://www.econbiz.de/10013164708

Reducing moral hazard at the expense of market discipline : the effectiveness of double liability before and during the Great Depression

Anderson, Haelim Park; Barth, Daniel; Choi, Dong Beom - 2018

Prior to the Great Depression, regulators imposed double liability on bank shareholders to ensure financial stability and protect depositors. Under double liability, shareholders of failing banks lost their initial investment and had to pay up to the par value of the stock in order to compensate...

Persistent link: https://www.econbiz.de/10011926198

Shadow banking and financial stability under limited deposit insurance

Voellmy, Lukas - 2019

I study the relation between shadow banking and financial stability in an economy in which banks are susceptible to self-fulfilling runs and in which government-backed deposit insurance is limited. Shadow banks issue only uninsured deposits while commercial banks issue both insured and uninsured...

Persistent link: https://www.econbiz.de/10012135982

Shadow banking : financial intermediation beyond banks

Adrian, Tobias; Chrétien, Edouard; Chui, Michael; … - Shadow Banking: Financial Intermediation beyond Banks …; … - 2018

Persistent link: https://www.econbiz.de/10011790739

Bank runs without sequential service

Andolfatto, David; Nosal, Ed - 2018

Banking models in the tradition of Diamond and Dybvig (1983) rely on sequential service to explain belief-driven runs. But the run-like phenomena witnessed during the financial crisis of 2007-08 occurred in the wholesale shadow banking sector where sequential service is largely absent,...

Persistent link: https://www.econbiz.de/10011895571

Optimal bank regulation in the presence of credit and run risk

Kashyap, Anil K.; Tsomocos, Dimitrios P.; Vardoulakis, … - 2017

We modify the Diamond and Dybvig (1983) model of banking to jointly study various regulations in the presence of credit and run risk. Banks choose between liquid and illiquid assets on the asset side, and between deposits and equity on the liability side. The endogenously determined asset...

Persistent link: https://www.econbiz.de/10011803125

Liquidity in resolution : estimating possible liquidity gaps for specific banks in resolution and in a systemic crisis

Amamou, Raschid; Baumann, Andreas; Chalamandaris, Dimitrios - 2020

This paper contributes to the debate on liquidity in resolution by providing a quantitative assessment of liquidity gaps of banks in resolution in the euro area. It estimates possible ranges of liquidity gaps for significant banks under different assumptions and scenarios. The findings suggest...

Persistent link: https://www.econbiz.de/10012313295

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