Aghion, PhilippeBolton, PatrickDewatripont, Mathias2014-07-112000Aghion, Philippe, Patrick Bolton, and Mathias Dewatripont. 2000. “Contagious Bank Failures in a Free Banking System.” European Economic Review 44 (4-6) (May): 713–718.0014-2921http://nrs.harvard.edu/urn-3:HUL.InstRepos:12490629This 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.en-USJournal Article2014-07-1110.1016/S0014-2921(00)00058-1