Money Runs

We develop a model in which, as in practice, bank debt is both a financial security used to raise funds and a kind of money used to facilitate trade. This dual role of bank debt provides a new rationale for why banks do what they do. In the model, banks endogenously perform the essential functions o...

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Veröffentlicht in:	NBER Working Paper Series 2019-09, p.26298
Hauptverfasser:	Donaldson, Jason R, Piacentino, Giorgia
Format:	Artikel
Sprache:	eng
Schlagworte:	Bank failures Banking industry Banks Central banks Corporate Finance Economic theory Funding Monetary Economics Regulation of financial institutions
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creator	Donaldson, Jason R Piacentino, Giorgia
description	We develop a model in which, as in practice, bank debt is both a financial security used to raise funds and a kind of money used to facilitate trade. This dual role of bank debt provides a new rationale for why banks do what they do. In the model, banks endogenously perform the essential functions of real-world banks: they transform liquidity, transform maturity, pool assets, and have dispersed depositors. Moreover, they make their debt redeemable on demand. Thus, they are endogenously fragile. We show novel effects of narrow banking, suspension of convertibility, and some other policies.
doi_str_mv	10.3386/w26298
format	Article
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subjects	Bank failures Banking industry Banks Central banks Corporate Finance Economic theory Funding Monetary Economics Regulation of financial institutions
title	Money Runs
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