Xavier Vives, Tuesday, March 17, 2015 - 00:00
Dirk Niepelt, Wednesday, January 21, 2015 - 00:00
Olivier Blanchard, Friday, October 3, 2014 - 00:00
Pierre-Cyrille Hautcoeur, Angelo Riva, Eugene N. White, Wednesday, July 2, 2014 - 00:00
The key challenge for lenders of last resort is to ameliorate financial crises without encouraging excessive risk-taking. This column discusses the lessons from the Banque de France’s successful handling of the crisis of 1889. Recognising its systemic importance, the Banque provided an emergency loan to the insolvent Comptoir d’Escompte. Banks that shared responsibility for the crisis were forced to guarantee the losses, which were ultimately recouped by large fines – notably on the Comptoir’s board of directors. This appears to have reduced moral hazard – there were no financial crises in France for 25 years.
Martin Brown, Stefan Trautmann, Razvan Vlahu, Thursday, April 10, 2014 - 00:00
Contagious bank runs are an important source of systemic risk. However, with observational data it is near-impossible to disentangle the contagion of bank runs from other potential causes of correlated deposit withdrawals across banks. This column discusses an experimental investigation of the mechanisms behind contagion. The authors find that panic-based deposit withdrawals can be strongly contagious across banks, but only if depositors know that the banks are economically related.
Itay Goldstein, Assaf Razin, Monday, March 11, 2013 - 00:00
Broadly speaking, there are three types of economic crisis: banking crises and panics, credit frictions and market freezes, and currency crises. This column argues that features from these types of crises have been at work and interacted with each other to shape the events of the last few years. From an extensive review of literature on these issues, it’s clear that the biggest challenge policymakers and economists face is in developing integrative models that better describing contemporary economic realities.
Stefan Trautmann, Razvan Vlahu, Sunday, August 28, 2011 - 00:00
One of the most iconic images from the subprime mortgage crisis in 2007 was the queue of people outside the British bank Northern Rock demanding their deposits back. This column uses experimental evidence to discuss another type of bank run – a borrower run – when mortgage holders strategically default on their loans.
Russell Cooper, Hubert Kempf, Friday, February 18, 2011 - 00:00
Before the surprising 2007 collapse of Northern Rock, it was taken for granted that bank runs were things of the past. But their return and the modifications of deposit insurance schemes lead many to question the credibility of the government’s commitment. What makes a run on a bank? And when should the government intervene? This column provides some answers.
José-Luis Peydró, Rajkamal Iyer, Sunday, April 25, 2010 - 00:00
How important are financial linkages in transmitting shocks across the financial system? This column examines evidence from India and finds that if a bank has a high level of exposure to another failing bank, the probability that there will be a run on the bank increases by 34 percentage points. This effect is even stronger when the financial system is weak.