Research


  • Money, Banking, and Financial Fragility

ABSTRACT: I study financial fragility in a setting where banking contracts are fixed in nominal terms and all transactions take place using money supplied by the central bank. The existing literature has emphasized that, in such settings, a lender of last resort can effectively prevent self-fulfilling bank runs. I show that, in the event of a crisis, the government will be tempted to intervene ex post to limit the effects of inflation. When depositors anticipate such a reaction, those who have an opportunity to withdraw before the intervention occurs may choose to run on their banks. I show that if the government can commit not to intervene, the efficient allocation will be the unique equilibrium outcome. If the government lacks in commitment, however, a self-fulfilling bank run can arise even with nominal banking contracts and a lender of last resort.

Other work in Progress

  • Transparency and Ambiguity in Bailout Policy (with Todd Keister)
  • Deposit insurance: How should uninsured deposits be treated?

Publication