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The welfare costs of self-fulfilling bank runs

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Resumo:We study the welfare implications of self-fulfilling bank runs and liquidity require- ments, in a neoclassical growth model where banks, facing long-lasting possible runs, can choose in any period a run-proof asset portfolio. In this framework, runs distort banks’ insurance provision against idiosyncratic liquidity shocks, and liquidity requirements resolve this distortion by forcing a credit tightening. Quantitatively, the welfare costs of self-fulfilling bank runs are equivalent to a constant consumption loss of up to 2.5 percent of U.S. GDP. Depending on fundamentals, liquidity requirements might generate small welfare gains, but also increase the welfare costs by up to 1.8 percent.
Autores principais:Mattana, Elena
Outros Autores:Panetti, Ettore
Assunto:financial intermediation bank runs regulation welfare
Ano:2017
País:Portugal
Tipo de documento:working paper
Tipo de acesso:acesso aberto
Instituição associada:Universidade de Lisboa
Idioma:inglês
Origem:Repositório da Universidade de Lisboa

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