%0 e Book %A Ahnert, Toni and Elamin, Mahmoud %I Bank of Canada %D 2019 %C Ottawa %D 2019 %G English %B Staff working paper / Bank of Canada %~ Universitätsbibliothek "Georgius Agricola" %T Bank runs, portfolio choice, and liquidity provision %U https://www.bankofcanada.ca/wp-content/uploads/2019/09/swp2019-37.pdf %X 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. %Z https://katalog.ub.tu-freiberg.de/Record/0-1677729015 %U https://katalog.ub.tu-freiberg.de/Record/0-1677729015