Review of Theories of Financial Crises
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چکیده
Diamond and Dybvig (1983) provide a framework for coherent analysis of this phenomenon. In their model, agents may suffer idiosyncratic short-term liquidity needs. Without banks, they would not be able to enjoy the fruits of long-term investments. By offering demand-deposit contracts, banks enable short-term consumers to enjoy those fruits. Banks rely on the fact that only a forecastable fraction of agents will need to consume early, and thus offer a contract that transfers consumption from the long-term consumers to the short-term consumers. This contract improves welfare as long as agents demand early withdrawal only if they genuinely need to consume in the short term. The contract may also lead to a catastrophic bank run, where all depositors demand early withdrawal and the bank collapses. This is an equilibrium since under the belief that the bank is going to collapse, the rational behavior is indeed to run on the bank.
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تاریخ انتشار 2011