A Systematic Banking Collapse in a Perfect Foresight World

44 Pages Posted: 3 Feb 2001 Last revised: 23 Nov 2022

See all articles by Robert P. Flood

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Peter M. Garber

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 1981

Abstract

In this paper we present a model in which a systematic banking collapse is possible in a perfect foresight, general equilibrium context. Our aim is to determine con3itions under which a collapse will eventually occur and the timing of such a collapse. The collapse can occur endogenously, driven by market fundamentals. Alternatively, it can be caused by a mass hysteria which generates itself in reality. Vie also compare the assumptions and implications of our model to the observable phenomena of the 1930's.

Suggested Citation

Flood, Robert P. and Garber, Peter M., A Systematic Banking Collapse in a Perfect Foresight World (June 1981). NBER Working Paper No. w0691, Available at SSRN: https://ssrn.com/abstract=227132

Robert P. Flood (Contact Author)

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Peter M. Garber

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