Asset returns and financial fragility

Arbeitspapier

What configuration of asset returns will make the banking system most susceptible to a self-fulfilling run? I study this question in a version of the model of Diamond and Dybvig (1983) with limited commitment and a non-trivial portfolio choice. I show that the relationship between the returns on banks´ assets and financial fragility is often non-monotone: a higher return may make banks either more or less susceptible to a run by depositors. The same is true for changes in the liquidation cost and the term premium. I derive precise conditions under which changes in each of these returns increase or decrease financial fragility.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2016-01

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Portfolio Choice; Investment Decisions ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Thema: financial fragility ; bank runs ; excess liquidity

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Li, Yang
• Ereignis: Veröffentlichung
• (wer): Rutgers University, Department of Economics
• (wo): New Brunswick, NJ
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/162923
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ