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    Herding and Bank Runs

    Gu, Chao
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    [PDF] HerdingBankRuns.pdf (320.1Kb)
    Date
    2007
    Format
    Working Paper
    Metadata
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    Abstract
    Traditional models of bank runs do not allow for herding effects, because in these models withdrawal decisions are assumed to be made simultaneously. I extend the banking model to allow a depositor to choose his withdrawal time. When he withdraws depends on his liquidity type (patient or impatient), his private, noisy signal about the quality of the bank's portfolio, and the withdrawal histories of the other depositors. In some cases, the optimal banking contract permits herding runs. Some of these "runs" are efficient in that the bank is liquidated before the portfolio worsens. Others are not efficient; these are cases in which the herd is misled.
    URI
    http://hdl.handle.net/10355/2560
    Part of
    Working papers (Department of Economics);WP 07-16
    Part of
    Economics publications
    Citation
    Department of Economics, 2007
    Rights
    OpenAccess.
    This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License.
    Collections
    • Economics publications (MU)

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