In this paper I ask whether a central bank policy of providing liquidity to banks during panics can prevent bank runs without causing moral hazard. This kind of policy has been widely advocated, most notably by Bagehot (1873). To analyze such a policy, I build a model with three key features: 1)...

We study the role of reporting rules in the context of bank runs. In our model, a financial institution receives an early but imprecise estimate of the performance of its investment and issues a report subject to a reporting rule. We find that, from a financial-stability standpoint, the optimal...

I use a fuzzy regression discontinuity design to study the impact of auction-based emergency liquidity at the onset of the 2007-09 crisis. My empirical design uses the presence of binding capacity constraints in the Federal Reserve's Term Auction Facility to isolate variation in short-term...

We develop a theoretical model examining the financial stability policy of a central bank serving as both the lender of last resort and the regulator of the financial system. The model accommodates the possibility of financial contagion through interbank market linkages, and adverse feedback...

In a global-games framework, we endogenize asset fire sales, bank runs, and contagion by emphasizing a lack of information: Investors can be uncertain whether banks selling assets to fend off runs are insolvent or simply illiquid. However, it is this uncertainty that leads to asset price...

In a global-games framework, we endogenize asset fire sales, bank runs, and contagion by emphasizing a lack of information: investors can be uncertain whether banks selling assets to fend o runs are insolvent or simply illiquid. However, it is this uncertainty that leads to asset price collapses...

This paper presents and analyzes a simple banking model in which banks have access to international capital markets and domestic asset markets. The model generates two types of equilibria: a no-default equilibrium and a mixed equilibrium. In the no-default equilibrium, all banks are symmetric...

This paper studies endogenous liquidity crises as the result of information panics. Collective ignorance is welfare maximizing but it is fragile, susceptible to self-fulfilling fears about asymmetric information. When investors become worried about the potential of adverse selection, they raise...

Assessing how banks respond to changes in regulatory requirements requires the use of a modeling framework able to account for heterogeneity in the banking system and the adaptive behavior of banks. This paper proposes an agent-based model to analyze the interaction between regulatory...

Bank runs are always associated with economy failure and investor panic in the literature. This paper explores the relationship between technology innovation and bank runs in a general equilibrium model. Intuitively, in a stable economy, which says no technology innovation, the return of capital...