A bank panic model with a bond market

Yasuo Maeda, Yoshikiyo Sakai

Research output: Contribution to journalArticle

Abstract

We have constructed a model of bank failure with monetary assets (bonds), adopting the overlapping-generations model. In it, monetary assets play a role in dispersing the credit crunch from a single bank run into a nationwide bank panic. As established by Diamond and Dybvig (1983), a single bank run is explained by a model without any monetary assets. In our model, however, the bond market is introduced to describe the process in which a bank run spreads. As a result, our model describes a general phenomenon - credit market failure - rather than a single bank run.

Original languageEnglish
Pages (from-to)440-453
Number of pages14
JournalJapanese Economic Review
Volume49
Issue number4
Publication statusPublished - 1998 Dec
Externally publishedYes

Fingerprint

Bond market
Bank panic
Bank runs
Assets
Diamond
Overlapping generations model
Market failure
Credit markets
Credit crunch
Bank failure

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

A bank panic model with a bond market. / Maeda, Yasuo; Sakai, Yoshikiyo.

In: Japanese Economic Review, Vol. 49, No. 4, 12.1998, p. 440-453.

Research output: Contribution to journalArticle

Maeda, Y & Sakai, Y 1998, 'A bank panic model with a bond market', Japanese Economic Review, vol. 49, no. 4, pp. 440-453.
Maeda, Yasuo ; Sakai, Yoshikiyo. / A bank panic model with a bond market. In: Japanese Economic Review. 1998 ; Vol. 49, No. 4. pp. 440-453.
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