Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
Bank Runs without Sequential Service
David Andolfatto
Ed Nosal

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, suggesting 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
Cite this item
David Andolfatto & Ed Nosal, Bank Runs without Sequential Service, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 2018-6, 20 Aug 2018.
More from this series
JEL Classification:
Subject headings:
Keywords: bank runs; increasing returns to scale; echanism design
DOI: 10.29338/wp2018-06
For corrections, contact Elaine Clokey ()
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