On the dynamics and severity of bank runs: An experimental study

Andrew Schotter, Tanju Yorulmazer

    Research output: Contribution to journalArticle

    Abstract

    This paper presents an experimental investigation of the factors that affect the dynamics and severity of bank runs. Our experiments demonstrate that the more information laboratory economic agents can expect to learn about the crisis as it develops, the more willing they are to restrain themselves from withdrawing their funds once a crisis occurs. Furthermore, our results indicate that the presence of insiders, who know the quality of the bank, significantly affects the dynamics of bank runs and helps mitigate their severity. We also show that deposit insurance, even of a limited type, can help diminish the severity of bank runs.

    Original languageEnglish (US)
    Pages (from-to)217-241
    Number of pages25
    JournalJournal of Financial Intermediation
    Volume18
    Issue number2
    DOIs
    StatePublished - Apr 2009

    Fingerprint

    Experimental study
    Severity
    Bank runs
    Economics
    Factors
    Deposit insurance
    Insider
    Experiment

    Keywords

    • Bank runs
    • Banking crises
    • Deposit insurance
    • Experiments
    • Informed depositors

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

    Cite this

    On the dynamics and severity of bank runs : An experimental study. / Schotter, Andrew; Yorulmazer, Tanju.

    In: Journal of Financial Intermediation, Vol. 18, No. 2, 04.2009, p. 217-241.

    Research output: Contribution to journalArticle

    Schotter, Andrew ; Yorulmazer, Tanju. / On the dynamics and severity of bank runs : An experimental study. In: Journal of Financial Intermediation. 2009 ; Vol. 18, No. 2. pp. 217-241.
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