Voluntary insurance vs. stabilization funds: An experimental analysis on bank runs
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Other documents of the author: Barreda-Tarrazona, Iván; Grimalda, Gianluca; Teglio, Andrea
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comunitat-uji-handle2:10234/8643
comunitat-uji-handle3:10234/8644
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INVESTIGACIONMetadata
Title
Voluntary insurance vs. stabilization funds: An experimental analysis on bank runsDate
2024-03-19Publisher
ElsevierISSN
2214-6350Bibliographic citation
Barreda-Tarrazona, Iván, Gianluca Grimalda, and Andrea Teglio. "Voluntary insurance vs. stabilization funds: An experimental analysis on bank runs." Journal of Behavioral and Experimental Finance (2024): 100909.Type
info:eu-repo/semantics/articleVersion
info:eu-repo/semantics/publishedVersionSubject
Abstract
Banking crises have recurrently emphasized the crucial need for establishing effective mechanisms to prevent bank runs, and different organizations are exploring a range of potential measures. With the aim of contri ... [+]
Banking crises have recurrently emphasized the crucial need for establishing effective mechanisms to prevent bank runs, and different organizations are exploring a range of potential measures. With the aim of contributing to this debate, we run a laboratory experiment to study the effectiveness of two untested devices: Stability funds that automatically limit depositors’ possibility of withdrawing their assets, and voluntary individual insurance against the risk of default. Depositors start the interaction with a monetary endowment deposited in a bank. They can then withdraw money before and after the bank suffers a liquidity loss. Such a loss can be either permanent or temporary, but its nature will only be discovered at the end of the interaction. The bank defaults if the desired withdrawals exceed its available liquidity. Our results show that the only effective mechanism in reducing bank defaults, compared to the baseline, is the stability fund with high coverage. When groups have a high share of female depositors, there is a significant reduction in the likelihood of bank runs, which can be explained by women’s higher propensity to buy insurance. When a critical liquidity signal is issued, indicating a dangerous situation, women’s lower propensity to withdraw disappears, bringing it to levels similar to that of men. [-]
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Journal of Behavioral and Experimental Finance 42 (2024) 100909Funder Name
Ministerio de Ciencia, Innovación y Universidades | MCIN/AEI/10.13039/501100011033/ | ERDF A way of making Europe | Italian Ministry of University and Research (MUR)
Project code
Project PID2021-123053OB-I00 | PRIN 2020SKJSTF
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2214-6350/© 2024 The Author(s). Published by Elsevier B.V.
info:eu-repo/semantics/openAccess
info:eu-repo/semantics/openAccess
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