Learning in bank runs

Eva Schliephake; Joel Shapiro

Learning in bank runs

Eva Schliephake^*
, Joel Shapiro

^*Corresponding author for this work

Research output: Working paper › Discussion paper

12 Downloads

Abstract

We examine a model in which depositor learning exacerbates bank runs. Informed depositors can quickly withdraw when the bank has low-quality assets. Uninformed depositors may decide to wait, which allows them to learn by observing informed depositors' actions. However, learning that the bank has low-quality assets will spark a run ex-post, which increases the incentives of uninformed depositors to run ex-ante. Moreover, when there are more informed depositors, uninformed depositors have a fear of missing out, which also makes preemptive runs more likely. Learning may, thus, increase the likelihood of panic runs and decrease surplus.

Original language	English
Publisher	Centre for Economic Policy Research
Publication status	Published - 26 Sept 2021

Publication series

Name	CEPR Discussion Paper
No.	DP16581
ISSN (Electronic)	0265-8003

Keywords

Information-based bank runs

Access to Document

94660416Final published version, 2.63 MBLicence: Unspecified

http://hdl.handle.net/10400.14/47027Licence: Unspecified

CUBE: Católica Lisbon Research Unit in Business and Economics
Machado, F. (PI), Aranda, A. M. (Researcher), Costa, A. I. D. A. (Researcher), Martins, A. P. (Researcher), Bernard, A. (Researcher), Fidalgo, A. (Researcher), Reis, C. (Researcher), Abecassis-Moedas, C. (Researcher), Santos, C. (Researcher), Tran, D. (Researcher), Fernandes, D. (Researcher), Bonfim, D. (Researcher), Schliephake, E. (Researcher), Kalogirou, F. (Researcher), Reis, F. (Researcher), Santos, F. (Researcher), Machado, F. (Researcher), Sguera, F. (Researcher), Cerqueiro, G. (Researcher), Reis, H. (Researcher), Barreto, I. (Researcher), Silva, J. (Researcher), Salvado, J. C. (Researcher), Neves, J. C. D. (Researcher), Gijsbrechts, J. (Researcher), Stahl, J. (Researcher), Guedes, J. C. (Researcher), Faias, J. (Researcher), Wagner, L. (Researcher), Correia, I. (Researcher), Saldanha, M. F. (Researcher), Fontes, J. C. (Researcher), Modesto, L. (Researcher), Meira, M. (Researcher), Matos, M. G. D. (Researcher), Gouveia, M. (Researcher), Kozeniauskas, N. (Researcher), Bertani, N. (Researcher), Couzoff, P. (Researcher), Barroso, P. (Researcher), Encarnação, P. (Researcher), Raposo, P. (Researcher), Teles, P. (Researcher), Bastos, W. (Researcher), Bohnsack, R. (Researcher), Vale, R. C. D. (Researcher), Ferreira, R. (Researcher), Lloyd-Braga, T. (Researcher), Ramus, T. (Researcher), Colaço, V. H. (Researcher), Cavicchini, A. (Researcher), Parada, P. (Researcher), Pieters, R. (Researcher), Pinto, F. S. (Researcher), Colaço, V. H. (Researcher) & Venter, Z. (Researcher)
1/01/20 → 31/12/25
Project: Research

Cite this

@techreport{e7f0e0d6c84449bab57cb667e3e75ce3,

title = "Learning in bank runs",

abstract = "We examine a model in which depositor learning exacerbates bank runs. Informed depositors can quickly withdraw when the bank has low-quality assets. Uninformed depositors may decide to wait, which allows them to learn by observing informed depositors' actions. However, learning that the bank has low-quality assets will spark a run ex-post, which increases the incentives of uninformed depositors to run ex-ante. Moreover, when there are more informed depositors, uninformed depositors have a fear of missing out, which also makes preemptive runs more likely. Learning may, thus, increase the likelihood of panic runs and decrease surplus.",

keywords = "Information-based bank runs",

author = "Eva Schliephake and Joel Shapiro",

year = "2021",

month = sep,

day = "26",

language = "English",

series = "CEPR Discussion Paper",

publisher = "Centre for Economic Policy Research",

number = "DP16581",

address = "United Kingdom",

type = "WorkingPaper",

institution = "Centre for Economic Policy Research",

}

TY - UNPB

T1 - Learning in bank runs

AU - Schliephake, Eva

AU - Shapiro, Joel

PY - 2021/9/26

Y1 - 2021/9/26

N2 - We examine a model in which depositor learning exacerbates bank runs. Informed depositors can quickly withdraw when the bank has low-quality assets. Uninformed depositors may decide to wait, which allows them to learn by observing informed depositors' actions. However, learning that the bank has low-quality assets will spark a run ex-post, which increases the incentives of uninformed depositors to run ex-ante. Moreover, when there are more informed depositors, uninformed depositors have a fear of missing out, which also makes preemptive runs more likely. Learning may, thus, increase the likelihood of panic runs and decrease surplus.

AB - We examine a model in which depositor learning exacerbates bank runs. Informed depositors can quickly withdraw when the bank has low-quality assets. Uninformed depositors may decide to wait, which allows them to learn by observing informed depositors' actions. However, learning that the bank has low-quality assets will spark a run ex-post, which increases the incentives of uninformed depositors to run ex-ante. Moreover, when there are more informed depositors, uninformed depositors have a fear of missing out, which also makes preemptive runs more likely. Learning may, thus, increase the likelihood of panic runs and decrease surplus.

KW - Information-based bank runs

M3 - Discussion paper

T3 - CEPR Discussion Paper

BT - Learning in bank runs

PB - Centre for Economic Policy Research

ER -

Learning in bank runs

Abstract

Publication series

Keywords

Access to Document

Fingerprint

Projects

CUBE: Católica Lisbon Research Unit in Business and Economics

Cite this