Template-Type: ReDIF-Paper 1.0
Author-Name: Monroy-Taborda Sebastián
Author-Name-First: Sebastián
Author-Name-Last: Monroy-Taborda
Title: Bank Runs and Inequality
Abstract: In this paper, I examine the relationship between income inequality and bank runs. Analyzing data for 17 countries between 1880 and 2013, I find a positive (and statistically significant) correlation between income inequality and the likelihood of bank runs. I propose a banking model to explore the mechanism underpinning this correlation. This model predicts that rising inequality increases the probability of a bank run. Furthermore, I find that income inequality increases consumption allocations in equilibrium, as they depend on the aggregate level of endowment, and the bank can redistribute between depositors, leading to a higher risk in the bank’s investment portfolio.
Length:  30 pages
Creation-Date:  2023-11
File-URL: https://aaep.org.ar/works/works2023/4672.pdf
File-Format: Application/pdf
Number: 4672
Classification-JEL: G01, D31
Handle: RePEc:aep:anales:4672