Contagious bank failures in a free banking system
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CitationAghion, Philippe, Patrick Bolton, and Mathias Dewatripont. 2000. “Contagious Bank Failures in a Free Banking System.” European Economic Review 44 (4-6) (May): 713–718.
AbstractThis paper develops a model of an unregulated banking system based around a private clearing house arrangement. Whilst such a system may dominate one with a public safety net in reducing moral hazard in lending and therefore the scope for individual bank insolvency, it also increases the likelihood of contagious bank failures following a systemic shock or an aggregate liquidity shortage.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:12490629
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