The Experts below are selected from a list of 360 Experts worldwide ranked by ideXlab platform
Hubert Janos Kiss - One of the best experts on this subject based on the ideXlab platform.
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panic Bank Runs
Social Science Research Network, 2017Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract:We provide experimental evidence that panic Bank Runs occur in the absence of problems with fundamentals and coordination failures among depositors, the two main culprits identified in the literature. Depositors withdraw when they observe that others do so, even when theoretically they should not. Our findings suggest that panic also manifests itself in the beliefs of depositors, who overestimate the probability that a Bank run is underway. Loss-aversion has a predictive power on panic behavior, while risk or ambiguity aversion do not.
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correlated observations the law of small numbers and Bank Runs
PLOS ONE, 2016Co-Authors: Gergely Horvath, Hubert Janos KissAbstract:Empirical descriptions and studies suggest that generally depositors observe a sample of previous decisions before deciding if to keep their funds deposited or to withdraw them. These observed decisions may exhibit different degrees of correlation across depositors. In our model depositors decide sequentially and are assumed to follow the law of small numbers in the sense that they believe that a Bank run is underway if the number of observed withdrawals in their sample is large. Theoretically, with highly correlated samples and infinite depositors Runs occur with certainty, while with random samples it needs not be the case, as for many parameter settings the likelihood of Bank Runs is zero. We investigate the intermediate cases and find that i) decreasing the correlation and ii) increasing the sample size reduces the likelihood of Bank Runs, ceteris paribus. Interestingly, the multiplicity of equilibria, a feature of the canonical Diamond-Dybvig model that we use also, disappears almost completely in our setup. Our results have relevant policy implications.
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correlated observations the law of small numbers and Bank Runs
Research Papers in Economics, 2014Co-Authors: Gergely Horvath, Hubert Janos KissAbstract:Empirical descriptions and studies suggest that generally depositors observe a sample of previous decisions before deciding if to keep their funds deposited or to withdraw them. These observed decisions may exhibit different degrees of correlation across depositors. In our model depositors are assumed to follow the law of small numbers in the sense that they believe that a Bank run is underway if the number of observed withdrawals in their sample is high. Theoretically, with highly correlated samples and infinite depositors Runs occur with certainty, while with random samples it needs not be the case, as for many parameter settings the likelihood of Bank Runs is less than one. To investigate the intermediate cases, we use simulations and find that decreasing the correlation reduces the likelihood of Bank Runs, often in a non-linear way. We also study the effect of the sample size and show that increasing it makes Bank Runs less likely. Our results have relevant policy implications.
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think twice before running Bank Runs and cognitive abilities
Research Papers in Economics, 2014Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract:We assess the impact of cognitive abilities on withdrawal decisions in a Bank-run game. In our setup, depositors choose sequentially between withdrawing or keeping their funds deposited in a common Bank. They may observe previous decisions depending on the information structure. Theoretically, the last depositor in the sequence of decisions has a dominant strategy and should always keep the funds deposited, regardless of what she observes (if anything). Recognizing the dominant strategy, however, is not always straightforward. If there exists strategic uncertainty (e.g., the last depositor has no information about predecessors’ decisions) the identification of the dominant strategy requires harder thinking than when there is not strategic uncertainty (e.g., the last depositor is informed about all previous decisions). We find that cognitive abilities, as measured by the Cognitive Reflection Test (CRT), predict withdrawals in the presence of strategic uncertainty (participants with higher abilities tend to identify the dominant strategy more easily) but the CRT does not predict behavior when there is no strategic uncertainty.
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do social networks prevent or promote Bank Runs
Research Papers in Economics, 2013Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract:We report experimental evidence on the effect of observability of actions on Bank Runs. We model depositors' decision-making in a sequential framework, with three depositors located at the nodes of a network. Depositors observe the other depositors' actions only if connected by the network. Theoretically, a sufficient condition to prevent Bank Runs is that the second depositor to act is able to observe the first one's action (no matter what is observed). Experimentally, we find that observability of actions affects the likelihood of Bank Runs, but depositors' choice is highly influenced by the particular action that is being observed. Depositors who are observed by others at the beginning of the line are more likely to keep their money deposited, leading to less Bank Runs. When withdrawals are observed, Bank Runs are more likely even when the mere observation of actions should prevent them.
Tanju Yorulmazer - One of the best experts on this subject based on the ideXlab platform.
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Liquidity, Bank Runs, and Bailouts: Spillover Effects During the Northern Rock Episode
Journal of Financial Services Research, 2010Co-Authors: Paul Goldsmith-pinkham, Tanju YorulmazerAbstract:In September 2007, Northern Rock—the fifth largest mortgage lender in the United Kingdom—experienced an old-fashioned Bank run, the first Bank run in the U.K. since the collapse of City of Glasgow Bank in 1878. The run had been contained by the government’s announcement that it would guarantee all deposits in Northern Rock. This paper analyzes spillover effects during the Northern Rock episode and shows that both the Bank run and the subsequent bailout announcement had significant effects on the rest of the U.K. Banking system, as measured by abnormal returns on the stock prices of Banks. The paper also shows that the effects were a rational response by investors to market news about the liability side of Banks’ balance sheets. In particular, Banks that rely on funding from wholesale markets were significantly affected, a result consistent with the drying up of liquidity in wholesale markets and the record-high levels of the London InterBank Offered Rate (LIBOR) during the crisis.
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on the dynamics and severity of Bank Runs an experimental study
Journal of Financial Intermediation, 2009Co-Authors: Andrew Schotter, Tanju YorulmazerAbstract:Article history: This paper presents an experimental investigation of the factors that affect the dynamics and severity of Bank Runs. Our experiments demonstrate that the more information laboratory economic agents can expect to learn about the crisis as it develops, the more willing they are to restrain themselves from withdrawing their funds once a crisis occurs. Furthermore, our results indicate that the presence of insiders, who know the quality of the Bank, significantly affects the dynamics of Bank Runs and helps mitigate their severity. We also show that deposit insurance, even of a limited type, can help diminish the severity of Bank Runs. Published by Elsevier Inc.
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on the dynamics and severity of Bank Runs an experimental study
Social Science Research Network, 2008Co-Authors: Andrew Schotter, Tanju YorulmazerAbstract:This paper presents an experimental investigation of the factors that affect the dynamics and severity of Bank Runs. Our experiments demonstrate that the more information laboratory economic agents can expect to learn about the crisis as it develops, the more willing they are to restrain themselves from withdrawing their funds once a crisis occurs. Furthermore, our results indicate that the presence of insiders, who know the quality of the Bank, significantly affects the dynamics of Bank Runs and helps mitigate their severity. We also show that deposit insurance, even of a limited type, can help diminish the severity of Bank Runs.
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liquidity Bank Runs and bailouts spillover effects during the northern rock episode
Social Science Research Network, 2008Co-Authors: Tanju YorulmazerAbstract:In September 2007, Northern Rock - the fifth largest mortgage lender in the UK - experienced an old-fashioned Bank run, the first Bank run in the UK since the collapse of City of Glasgow Bank in 1878. The run had been contained by the bailout announcement of the government that guaranteed all deposits in Northern Rock. This paper analyzes spillover effects during the Northern Rock episode and shows that both the Bank run and the subsequent bailout announcement had significant effects on the rest of the UK Banking system, measured by abnormal returns on the stock price of Banks. The paper also shows that the effects were a rational response of investors to market news about the liability side of Bank balance sheets. In particular, Banks that rely on funding from wholesale markets were significantly affected, which is consistent with the drying up of liquidity in wholesale markets and the record high levels of the London InterBank Offered Rate (LIBOR) during the crisis.
Alfonso Rosagarcia - One of the best experts on this subject based on the ideXlab platform.
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panic Bank Runs
Social Science Research Network, 2017Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract:We provide experimental evidence that panic Bank Runs occur in the absence of problems with fundamentals and coordination failures among depositors, the two main culprits identified in the literature. Depositors withdraw when they observe that others do so, even when theoretically they should not. Our findings suggest that panic also manifests itself in the beliefs of depositors, who overestimate the probability that a Bank run is underway. Loss-aversion has a predictive power on panic behavior, while risk or ambiguity aversion do not.
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think twice before running Bank Runs and cognitive abilities
Research Papers in Economics, 2014Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract:We assess the impact of cognitive abilities on withdrawal decisions in a Bank-run game. In our setup, depositors choose sequentially between withdrawing or keeping their funds deposited in a common Bank. They may observe previous decisions depending on the information structure. Theoretically, the last depositor in the sequence of decisions has a dominant strategy and should always keep the funds deposited, regardless of what she observes (if anything). Recognizing the dominant strategy, however, is not always straightforward. If there exists strategic uncertainty (e.g., the last depositor has no information about predecessors’ decisions) the identification of the dominant strategy requires harder thinking than when there is not strategic uncertainty (e.g., the last depositor is informed about all previous decisions). We find that cognitive abilities, as measured by the Cognitive Reflection Test (CRT), predict withdrawals in the presence of strategic uncertainty (participants with higher abilities tend to identify the dominant strategy more easily) but the CRT does not predict behavior when there is no strategic uncertainty.
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do social networks prevent or promote Bank Runs
Research Papers in Economics, 2013Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract:We report experimental evidence on the effect of observability of actions on Bank Runs. We model depositors' decision-making in a sequential framework, with three depositors located at the nodes of a network. Depositors observe the other depositors' actions only if connected by the network. Theoretically, a sufficient condition to prevent Bank Runs is that the second depositor to act is able to observe the first one's action (no matter what is observed). Experimentally, we find that observability of actions affects the likelihood of Bank Runs, but depositors' choice is highly influenced by the particular action that is being observed. Depositors who are observed by others at the beginning of the line are more likely to keep their money deposited, leading to less Bank Runs. When withdrawals are observed, Bank Runs are more likely even when the mere observation of actions should prevent them.
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on the effects of deposit insurance and observability on Bank Runs an experimental study
Journal of Money Credit and Banking, 2012Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract: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. We consider three depositors in the line of a Bank, who decide between withdrawing or keeping their money deposited. 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 find that different levels of deposit insurance and the possibility of observing other depositors’ actions affect the likelihood of Bank Runs. When decisions are not observable, higher levels of deposit insurance decrease the probability of Bank Runs. When decisions are observable, this need not to be the case. These results suggest that (i) observability might be considered as a partial substitute of deposit insurance and (ii) the optimal deposit insurance should take into account the degree of observability.
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on the effects of deposit insurance and observability on Bank Runs an experimental study
Social Science Research Network, 2011Co-Authors: Hubert Janos Kiss, Ismael Rodriguezlara, Alfonso RosagarciaAbstract: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. We consider three depositors in the line of a common Bank. Depositors decide in sequence between withdrawing or keeping their money deposited. We have three different treatments in which depositors who keep the money have full insurance, are partially insured, or not insured at all in case of a Bank run. We find that different levels of deposit insurance and the possibility of observing other depositor's actions reduce the likelihood of Bank Runs. The effect of these variables is not independent. Our data suggest that optimal deposit insurance should take into account the degree of observability: full and partial insurance are equally effective when decisions are observable, whereas full insurance is more likely to prevent Bank Runs when depositors do not observe other depositors' decisions.
Haibin Zhu - One of the best experts on this subject based on the ideXlab platform.
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Bank Runs welfare and policy implications
Journal of Financial Stability, 2005Co-Authors: Haibin ZhuAbstract:Abstract This paper studies the welfare implications of various government policies that have been used to prevent Bank Runs. The benchmark model suggests that a Bank run is a business-cycle-state-related phenomenon and it leads to the failure of the risk-sharing mechanism provided by the Banking sector. Extensions of the model show that a number of policy instruments, including the suspension of convertibility of deposits, the taxation on short-term deposits, reserve requirement and blanket guarantee, turn out to be inefficient. Instead, I propose that a limited-coverage deposit insurance scheme or capital requirements can be welfare-improving.
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Bank Runs welfare and policy implications
Social Science Research Network, 2002Co-Authors: Haibin ZhuAbstract:This paper proposes a model in which Bank Runs are closely related to the state of the business cycle. The benchmark model shows that, in a market economy, there are welfare losses due to the existence of Bank Runs. Extensions of the model explore the welfare effects of various government policies. The results suggest that an interest-cap deposit insurance scheme is an efficient policy to prevent Bank Runs, while other policies, including the suspension of convertibility, a penalty on short-term deposits and full-coverage deposit insurance schemes, will all have adverse side effects.
Susanne Gunther - One of the best experts on this subject based on the ideXlab platform.
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die vermeidung von Bank Runs und der erhalt von marktdisziplin das dilemma der Bankenregulierung
Arbeitspapiere, 2014Co-Authors: Susanne GuntherAbstract:Das Vertrauen privater Einleger in ihre Banken spielt eine wichtige okonomische und regulatorische Rolle, da sein Verlust Systeminstabilitat herbeifuhren kann. Die Vermeidung von Bank Runs ist die Intention von Einlagensicherungssystemen. Im deutschen Bankensystem werden Einleger durch zwei unterschiedliche Konzepte abgesichert: Zum einen durch die Einlagen- und zum anderen durch die Institutssicherung. Erstere soll den Erhalt von 100.000 Euro im Falle einer Bankeninsolvenz sicherstellen, wahrend letztere 100 Prozent des bei einer Bank gehaltenen Vermogens sichern und genau genommen den Insolvenzfall selbst vermeiden soll. In der Theorie fuhrt eine solche Absicherung zu einem erheblichen Verlust an Marktdisziplin. Dieses Arbeitspapier identifiziert Unterschiede im Bankkundenverhalten unter Berucksichtigung dieser unterschiedlichen Sicherungskonzepte und unterschiedlicher Falligkeiten der Bankpassiva, zum einen Sicht- und Spareinlagen und zum anderen Inhaberschuldverschreibungen. Daruber hinaus stellt sich ein begrundeter Verdacht heraus, dass sowohl das Geschaftsmodell als auch die Grose einer Bank eine wichtige Vertrauenskomponente darstellen. Diese beruht vermutlich auf der Annahme impliziter Staatsgarantien.
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die vermeidung von Bank Runs und der erhalt von marktdisziplin das dilemma der Bankenregulierung
Research Papers in Economics, 2014Co-Authors: Susanne GuntherAbstract:The trust in Banks by private depositors plays an important economic and regulatory role, since they have the power to destabilize financial systems by Bank Runs. In order to prevent such Runs, deposit insurance systems are widely introduced. With regard to the German Banking system, deposits, or to be more precise, sight and saving deposits are covered by two different concepts: The deposit and the institute insurance concept. The former one protects 100.000 Euro of each private depositor in case of a Bank's liquidation, whereas the latter one is supposed to guarantee 100 percent of private wealth hold at credit institutes. In the strict sense, it is supposed to prevent Bankruptcy. In theory, these insurances lead to a deficit in depositors' market discipline. This Working Paper reveals differences between the behaviour of Bank clients referring to these diverse systems, and to different maturities, i.e. sight and saving deposits comparing to bearer bonds. Furthermore, there is a reasonable suspicion that a Bank's size plays an important role for trust, independent of the insurance concept, probably assuming implicit government guarantees.
