Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of St. Louis
Working Papers
Bank runs without sequential service
David Andolfatto
Ed Nosal
Abstract

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. This suggests that something other than sequential service is needed to help explain runs. We show that in the absence of sequential service runs can easily occur whenever bank-funded investments are subject to increasing returns to scale consistent with available evidence. Our framework is used to understand and evaluate recent banking and money market regulations.


Download Full text
Download https://doi.org/10.20955/wp.2018.016
Cite this item
David Andolfatto & Ed Nosal, Bank runs without sequential service, Federal Reserve Bank of St. Louis, Working Papers 2018-16, Jul 2018.
More from this series
JEL Classification:
Subject headings:
DOI: doi.org/10.20955/wp.2018.016
For corrections, contact Anna Oates ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal