Arbeitspapier
Bank runs, portfolio choice, and liquidity provision
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.
- Language
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Englisch
- Bibliographic citation
-
Series: Bank of Canada Staff Working Paper ; No. 2019-37
- Classification
-
Wirtschaft
Financial Crises
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Subject
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Financial institutions
Financial stability
Wholesale funding
- Event
-
Geistige Schöpfung
- (who)
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Ahnert, Toni
Elamin, Mahmoud
- Event
-
Veröffentlichung
- (who)
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Bank of Canada
- (where)
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Ottawa
- (when)
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2019
- DOI
-
doi:10.34989/swp-2019-37
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ahnert, Toni
- Elamin, Mahmoud
- Bank of Canada
Time of origin
- 2019
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