Journal Article: On the Effects of Deposit Insurance and Observability on Bank Runs: An Experimental Study (2012) Fisrt version / Primera version, 2011 (application/pdf) References: View references in EconPapers View complete reference list from CitEcĬitations: View citations in EconPapers (10) Track citations by RSS feed New Economics Papers: this item is included in nep-exp and nep-ias JEL-codes: C90 G21 (search for similar items in EconPapers) Keywords: deposit insurance observability bank runs experimental economics (search for similar items in EconPapers) These results suggest that (i) observability might be considered as a partial substitute of deposit insurance, and that (ii) the optimal deposit insurance should take into account the degree of observability. When decisions are observable, this is not the case. When decisions are not observable, higher levels of deposit insurance decrease the probability of bank runs. We find that different levels of deposit insurance and the possibility of observing other depositors’ actions affect the likelihood of bank runs. We have three treatments with different levels of deposit insurance which reflect the losses a depositor may incur in the case of a bank run. We consider three depositors in the line of a bank, who decide between withdrawing or keeping their money deposited. We study the effects of deposit insurance and observability of previous actions on the emergence of bank runs by means of a controlled laboratory experiment. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. Ismael Rodríguez Lara: Universidad de AlicanteĪuthors registered in the RePEc Author Service: Ismael Rodriguez-Lara and On the effects of deposit insurance and observability on bank runs: an experimental studyĪlfonso Rosa García: Universidad de Murcia
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