2013 Fiscal Year Final Research Report
Financial Contagion through Asset Price Spillovers
| Project/Area Number |
24730266
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Multi-year Fund |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Niigata University |
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Principal Investigator |
NAKATA Takeshi 新潟大学, 人文社会・教育科学系, 准教授 (70509439)
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| Project Period (FY) |
2012-04-01 – 2014-03-31
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| Keywords | グローバル・ゲーム / ソブリン債 / 最後の貸し手 / 預金取り付け |
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| Research Abstract |
This paper provides a framework that multiple bank runs and a sovereign debt default occur simultaneously. Banks invest their deposits to a government bond. If a bank run occurs, banks redeem the bond and, therefore, the possibility of the government defaulting heightens. Moreover, this, in turn, aggravates the banking crises. In the situation where such a vicious circle exits, we show that the lender-of-last-resort (LLR) facility by the government cannot prevent one solvent but illiquid bank, even brings another solvent and liquid bank to be ensnared in bank run. These findings imply that LLR facility not by the domestic government but by an international institution is required.
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