Anticipated Banking Panics
By Nobuhiro Kiyotaki, Mark Gertler and Andrea Prestipino
Published in the American Economic Review in 2016.
As argued by Bernanke (2012), a distinctive feature of the recent crisis was “run-like” behavior on the major financial institutions in the shadow banking sector. Early on there were “slow” runs where creditors began a steady stream of withdrawals. The panic then culminated with a series of “fast runs” in September 2008, leading to the nearly instantaneous collapse of the entire investment banking sector. The resulting disruption of financial intermediation, Bernanke argues, was likely the major factor that led the downturn to devolve into the Great Recession.view paper