Keep Calm and Bank On: Panic-Driven Bank Runs and the Role of Public Communication / Damiano Sandri, Francesco Grigoli, Yuriy Gorodnichenko, Olivier Coibion.

Format:

Book

Author/Creator:

Sandri, Damiano.

Contributor:

National Bureau of Economic Research.

Grigoli, Francesco.

Gorodnichenko, Yuriy.

Coibion, Olivier.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31644.

NBER working paper series no. w31644

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Using a survey with information treatments conducted in the aftermath of SVB's collapse, we study households' perspectives on bank stability, the potential for panic-driven bank runs, and the role of public communication. When informed about SVB's collapse, households become more likely to withdraw deposits, due to both a higher perceived risk of bank failure and higher expected losses on deposits in case of bank failure. Leveraging hypothetical questions and the exogenous variation in beliefs generated by the information treatments, we show that households reallocate deposit withdrawals primarily into other banks and cash, with little passthrough into spending. Information about FDIC insurance and communication about bank stability by the Federal Reserve can reassure depositors, while communication from political leaders only influences their electoral base.

Notes:

Print version record

August 2023.