Financial Law and Risk Control
Bank Runs, Deposit Insurance, and Liquidity
Douglas W. Diamond and Philip H. Dybvig
- Year
- 1983
- Venue
- Journal of Political Economy
- Level
- Introductory
Summary
Models banks as institutions that provide liquidity insurance through demand deposits while holding illiquid assets. The paper shows how such contracts can generate multiple equilibria, including self-fulfilling bank runs, and explains why deposit insurance can eliminate inefficient runs.
Citation
Douglas W. Diamond and Philip H. Dybvig. "Bank Runs, Deposit Insurance, and Liquidity." Journal of Political Economy, 1983.
DOI: 10.1086/261155
BibTeX
@article{Diamond1983Bank,
title = {Bank Runs, Deposit Insurance, and Liquidity},
author = {Douglas W. Diamond and Philip H. Dybvig},
year = {1983},
journal = {Journal of Political Economy},
doi = {10.1086/261155},
url = {https://www.journals.uchicago.edu/doi/10.1086/261155}
}