BoE Financial Stability Seminar

Abstract

We study bank runs using a novel historical cross-country dataset that covers 184 countries since 1800 and combines a new narrative chronology with statistical indicators of bank deposit withdrawals. We document the following facts: (i) the unconditional likelihood of a bank run is 1.9%, and that of significant deposit withdrawals is 12.5%; (ii) systemic bank runs—those that are accompanied by deposit withdrawals—are associated with substantially larger output losses than non-systemic runs or deposit contractions alone; (iii) bank runs are contractionary even when they are not triggered by fundamental causes, banks are well-capitalized, and there is no evidence of a crisis or widespread failures in the banking sector; (iv) in both historical and contemporary episodes, depositors tend to run on highly leveraged banks, which leads to a credit crunch and a reallocation of deposits across banks; and (v) liability guarantees are associated with lower output losses after systemic runs, while having a lender of last resort or deposit insurance reduces the probability of a run becoming systemic. Overall, our findings highlight a key role of sudden bank liability disruptions in economic fluctuations, over and above other sources of financial fragility.

Tobias König

Post-Doctoral Researcher in Economics

I am a postdoctoral researcher at the Institute of Finance and Statistics at the economics department of the University of Bonn and the Collaborative Research Center (CRC) TR 224.