Finnish paper explains why bank runs are sometimes partial
Researchers create a model with a government and consumers as participants
As deposits are withdrawn during a bank run, the size of the government's liability is reduced, which increases the incentive to provide a guarantee, according to research published by the Bank of Finland last week.
This in turn reduces depositors' incentive to withdraw their funds, which "may explain why bank runs sometimes remain partial", Ilkka Kiema and Esa Jokivuolle say in their discussion paper, Why are bank runs sometimes partial?
The researchers find there is a unique point when bank
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