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Optimal Financial Crises [PDF]
ABSTRACTEmpirical evidence suggests that banking panics are related to the business cycle and are not simply the result of “sunspots.” Panics occur when depositors perceive that the returns on bank assets are going to be unusually low. We develop a simple model of this.
Franklin Allen, Douglas Gale
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The homogenization of the financial system and financial crises
Journal of Financial Intermediation, 2008Financial institutions, especially large banks, have reached beyond their traditional activities in recent years and have become more homogeneous as a result. Even though this brings about diversification gains, we show that their stability may fall as consequence since institutions' incentives for taking on risk and supplying liquidity deteriorate ...
Wolf Wagner, Wolf Wagner
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