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References (11)
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Information aggregation in a noisy rational expectations economyJournal of Financial Economics, 9
- Publisher
- Wiley
- Copyright
- 1988 The American Finance Association
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- DOI
- 10.1111/j.1540-6261.1988.tb04606.x
- Publisher site
- See Article on Publisher Site
Abstract
ABSTRACT This paper shows that bank runs can be modeled as an equilibrium phenomenon. We demonstrate that some aspects of the intuitive “story” that bank runs start with fears of insolvency of banks can be rigorously modeled. If individuals observe long “lines” at the bank, they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run. However, bank runs occur even when no one has any adverse information. Extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations.
Journal
The Journal of Finance – Wiley
Published: Jul 1, 1988