Banking Panics and Policy Responses
License
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
0304-3932
Issue Date
Type of Publication
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Author(s)
Citation
Journal of Monetary Economics, 2010, 57, 4, 404-419
Cite
ENNIS, Huberto M., KEISTER, Todd, Banking Panics and Policy Responses, Journal of Monetary Economics, 2010, 57, 4, 404-419 - https://hdl.handle.net/1814/16454
Abstract
When policy makers have limited commitment power, self-fulfilling bank runs can arise as an equilibrium phenomenon. We study how such banking panics unfold in a version of the Diamond and Dybvig (1983) model. A run in this setting is necessarily partial, with only some depositors participating. In addition, a run naturally occurs in waves, with each wave of withdrawals prompting a further response from policy makers. In this way, the interplay between the actions of depositors and the responses of policy makers shapes the course of a crisis. (C) 2010 Elsevier B.V. All rights reserved.