Panic Bank Runs

8 Pages Posted: 3 Apr 2017

See all articles by Hubert Janos Kiss

Hubert Janos Kiss

Eötvös Loránd University; Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS)

Ismael Rodriguez-Lara

University of Granada - Campus La Cartuja

Alfonso Rosa-Garcia

Universidad Católica San Antonio de Murcia

Date Written: April 1, 2017

Abstract

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.

Keywords: bank runs, beliefs, panic, coordination, observability, loss aversion

JEL Classification: C72, D82, G21

Suggested Citation

Kiss, Hubert Janos and Rodriguez-Lara, Ismael and Rosa-Garcia, Alfonso, Panic Bank Runs (April 1, 2017). Available at SSRN: https://ssrn.com/abstract=2944813 or http://dx.doi.org/10.2139/ssrn.2944813

Hubert Janos Kiss (Contact Author)

Eötvös Loránd University ( email )

Pazmany Peter setany 1A
Budapest, -- H1117
Hungary

Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS) ( email )

Budaorsi ut 45
Budapest, 1112
Hungary

Ismael Rodriguez-Lara

University of Granada - Campus La Cartuja ( email )

Campus La Cartuja
Granada
Spain

Alfonso Rosa-Garcia

Universidad Católica San Antonio de Murcia ( email )

Avenida Jerónimos, 135
Guadalupe
Murcia, 30107
Spain

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