Can the risk of losses upon premature liquidation produce bank runs? We show how a unique run equilibrium driven by … asset liquidity risk arises even under minimal fundamental risk. To study the role of illiquidity we introduce realistic … norms on bank default, such that mandatory stay is triggered before all illiquid assets are sold. Since illiquid assets are …

This paper proposes a theory of shadow bank runs in the presence of sponsor liquidity support. We show that liquidity … lines designed to insulate shadow banks from market and funding liquidity risk can be destabilizing, as they provide them … with incentives to acquire private information about their assets' type. This can lead to inefficient market liquidity dry …

that log-monetary reserves are coupled, and that banks can also borrow/lend from/to a central bank. When all banks optimize …

Can the risk of losses upon premature liquidation produce bank runs? We show how a unique run equilibrium driven by … asset liquidity risk arises even under minimal fundamental risk. To study the role of illiquidity we introduce realistic … norms on bank default, such that mandatory stay is triggered before all illiquid assets are sold. Since illiquid assets are …