Liquidity shortages and banking crises

Deskripsi

We show in this article that bank failures can be contagious. Unlike earlier work where contagion stems from depositor panics or contractual links between banks, we argue that bank failures can shrink the common pool of liquidity, creating, or exacerbating aggregate liquidity shortahes. This could lead to a contagion of failures and atotal meltdown of the system..Printed Journal