Abstract
Since the end of WWII, economists generally believed that the phenomenon of bank runs had died away. However, sufficient evidences occurred in last two decades suggest the revival of bank run, supported by the facts that numerous banking panics occurred repeatedly with the traditional and new styles during the Asian Financial Crisis in 1997, the financial crisis in 2007, and the recent European debt crises. Therefore, classical economic and financial theories about bank runs need to be challenged. In this chapter, a bottom-up behavioral model is built to model bank runs. It is shown with agent-based modeling approach that animal spirits of the depositors together with endogenous optimism and pessimism can cause liquidity shock. In particular, bank run will be trigged if the animal sprit reaches to a tipping point. The model is tested with a set of empirical data, which shows that the effect of animal spirits is significant in reality. The findings in this research may shed some light on central bank’s monetary policy.
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Weihong, H., Qiao, H. (2016). Liquidity Shock, Animal Spirits and Bank Runs. In: Matsumoto, A., Szidarovszky, F., Asada, T. (eds) Essays in Economic Dynamics. Springer, Singapore. https://doi.org/10.1007/978-981-10-1521-2_13
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DOI: https://doi.org/10.1007/978-981-10-1521-2_13
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