Abstract

PEREZ CALDENTEY, Esteban  and  VERNENGO, Matías. Bank runs in practice and theory. Inv. Econ [online]. 2023, vol.82, n.325, pp.37-71.  Epub Nov 24, 2023. ISSN 0185-1667.  https://doi.org/10.22201/fe.01851667p.2023.325.86166.

The paper shows that past bank run episodes in the United States display a common pattern. Runs are endogenous to situations of perceived insolvency concerns resulting from the adoption of risky practices driven by the profit motive within a context of lose/inadequate regulation or deregulation. Risky practices make financial institutions more vulnerable to changes in external conditions. The mainstream approaches to bank runs are based on a characterization of an economy that resembles a cooperative economy (all resources are shared equally by all participants) rather than an entrepreneur economy whose end-motive is profit making. As a result, they provide implausible stories about bank runs. Building on the stylized facts of bank runs this paper presents the main building blocks for an alternative theory.

Keywords : Bank runs; coordination failure; asymmetric information; fundamentals; cooperative economy; entrepreneur economy.

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