Reserve Requirements, the Maturity Structure of Debt, and Bank Runs.

By: Al-Zein, Eza GhassanMaterial type: TextTextSeries: IMF Working PapersPublisher: Washington : International Monetary Fund, 2008Copyright date: ©2008Description: 1 online resource (28 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9781451914221Subject(s): Bank failures -- Econometric models | Bank reserves -- Econometric models | Banks and banking, Central -- Econometric models | Debts, Public -- Econometric modelsGenre/Form: Electronic books.Additional physical formats: Print version:: Reserve Requirements, the Maturity Structure of Debt, and Bank RunsDDC classification: 332.15 LOC classification: HG1656.A3 -- .A494 2008ebOnline resources: Click to View
Contents:
Intro -- Contents -- I. Introduction -- II. Motivation and Literature -- III. The Model -- A. The Domestic Economy -- B. Date-Specific and Maturity-Specific Reserve Requirements -- C. The Lenders' Problem -- D. Defining the Equilibrium -- IV. The Emergence of Bank Runs -- A. The Emergence of Bank Runs in the Setup Without Reserve Requirements -- Defining the Illiquidity Condition -- B. Can Reserve Requirements Prevent the Occurrence of a Bank Run? -- Illiquidity Conditions with Reserve Requirements -- Reserve Requirements and Market Failure -- C. International Lending After the Bank Runs: Are International Lenders "Throwing Good Money After Bad Money"? -- International Re-Optimization Problem -- V. Discussion -- Sunspot and Bank Run Probability -- Incentive to Form a Bank -- VI. Conclusion -- Appendix -- References -- Figures -- 1. Structure of the Model -- 2. Decision Tree at t=1 Summarizes How a Bank Run Would Occur.
Summary: The paper looks at the relationship between reserve requirements and the choice of the maturity structure of external debt in a general equilibrium setup, by incorporating the role of international lenders. A date- and maturity-specific reserve requirement is a fraction of the debt to be deposited in a non-interest bearing account at the central bank. At maturity, the central bank returns the reserves. There exist some specific combinations of date- and maturity-specific reserve requirements that reduce the vulnerability to bank runs. In such setup, lenders may still want to provide new short-term lending to the bank after a bank run.
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Intro -- Contents -- I. Introduction -- II. Motivation and Literature -- III. The Model -- A. The Domestic Economy -- B. Date-Specific and Maturity-Specific Reserve Requirements -- C. The Lenders' Problem -- D. Defining the Equilibrium -- IV. The Emergence of Bank Runs -- A. The Emergence of Bank Runs in the Setup Without Reserve Requirements -- Defining the Illiquidity Condition -- B. Can Reserve Requirements Prevent the Occurrence of a Bank Run? -- Illiquidity Conditions with Reserve Requirements -- Reserve Requirements and Market Failure -- C. International Lending After the Bank Runs: Are International Lenders "Throwing Good Money After Bad Money"? -- International Re-Optimization Problem -- V. Discussion -- Sunspot and Bank Run Probability -- Incentive to Form a Bank -- VI. Conclusion -- Appendix -- References -- Figures -- 1. Structure of the Model -- 2. Decision Tree at t=1 Summarizes How a Bank Run Would Occur.

The paper looks at the relationship between reserve requirements and the choice of the maturity structure of external debt in a general equilibrium setup, by incorporating the role of international lenders. A date- and maturity-specific reserve requirement is a fraction of the debt to be deposited in a non-interest bearing account at the central bank. At maturity, the central bank returns the reserves. There exist some specific combinations of date- and maturity-specific reserve requirements that reduce the vulnerability to bank runs. In such setup, lenders may still want to provide new short-term lending to the bank after a bank run.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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