How (Un-)Informed Are Depositors in a Banking Panic? A Lesson from History

Kristian Blickle, Markus Brunnermeier and Stephan Luck

No 20220217, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: How informed or uninformed are bank depositors in a banking crisis? Can depositors anticipate which banks will fail? Understanding the behavior of depositors in financial crises is key to evaluating the policy measures, such as deposit insurance, designed to prevent them. But this is difficult in modern settings. The fact that bank runs are rare and deposit insurance universal implies that it is rare to be able to observe how depositors would behave in absence of the policy. Hence, as empiricists, we are lacking the counterfactual of depositor behavior during a run that is undistorted by the policy. In this blog post and the staff report on which it is based, we go back in history and study a bank run that took place in Germany in 1931 in the absence of deposit insurance for insight.

Keywords: bank runs; deposit insurance; financial crises (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2022-02-17
New Economics Papers: this item is included in nep-ban, nep-his and nep-ias
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