American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Understanding Bank Runs: The Importance of Depositor-Bank Relationships and Networks
American Economic Review
vol. 102,
no. 4, June 2012
(pp. 1414–45)
Abstract
We use unique depositor-level data for a bank that faced a run to understand the factors that affect depositor behavior. We find uninsured depositors are most likely to run. Deposit insurance helps, but is only partially effective. Bank-depositor relationships mitigate runs, suggesting that relationship with depositors help banks reduce fragility. In addition, we also find that social networks matter. Finally, we find long-term effects of a solvent bank run in that depositors who run do not return back to the bank. Our results help understand the underlying dynamics of bank runs and hold important policy implications. (JEL D12, G21, O16, Z13)Citation
Iyer, Rajkamal, and Manju Puri. 2012. "Understanding Bank Runs: The Importance of Depositor-Bank Relationships and Networks." American Economic Review, 102 (4): 1414–45. DOI: 10.1257/aer.102.4.1414Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- Z13 Economic Sociology; Economic Anthropology; Social and Economic Stratification