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Bank runs, portfolio choice, and liquidity provision
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| Authors and Corporations: | , |
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| Other Authors: | Elamin, Mahmoud [Author] |
| Type of Resource: | E-Book |
| Language: | English |
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| Series: |
Bank of Canada: Staff working paper ; 2019, 37 (September 2019)
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| Subjects: | |
| Source: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Summary: | We examine the portfolio choice of banks in a micro-funded model of runs. To insure riskaverse investors against liquidity risk, competitive banks offer demand deposits. We use global games to link the probability of a bank run to the portfolio choice. Based upon interim information about risky investment, banks liquidate investments to hold a safe asset. This partial hedge against investment risk reduces the withdrawal incentives of investors for a given deposit rate. As a result of the portfolio choice, (i) banks provide more liquidity ex ante (so banks offer a higher deposit rate), and (ii) the welfare of investors increases. |
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| Physical Description: | 1 Online-Ressource (circa 51 Seiten); Illustrationen |