My last post argued that, despite what Diamond and Dybvig's famous theory suggests, bank runs have seldom proven fatal to otherwise sound banks. Instead, when people run on a bank, it's usually because it's already in hot water. In response to that post, a Twitter correspondent wondered…
The 2022 Nobel Prize in Economics is to be shared by Ben S. Bernanke, Douglas W. Diamond, and Philip H. Dybvig, “for research on banks and financial crises.” Diamond and Dybvig are best known for their 1983 article, “Bank Runs, Deposit Insurance, and Liquidity,” in which they…
On October 10th, Douglas Diamond and Philip Dybvig won the Sveriges Riksbank Prize in Economic Sciences, sharing it with Ben Bernanke "for research on banks and financial crises.” According to the prize committee, Diamond and Dybvig's research showed how the combination of borrowing short and lending long…
[This is the last half of a two-part critique of Douglas Diamond and Philip Dybvig's highly influential paper purporting to show that fractional reserve banking systems are inherently unstable. Part I can be found here.] Sauce for the Goose… Half a century after the fact, the "aggregate…
Has any theoretical work on banking been more influential than Douglas Diamond and Phillip Dybvig's 1983 JPE article, "Bank Runs, Deposit Insurance, and Liquidity"? If so, I can't think of it. With well over 12,000 Google citations and counting, it's certainly among the most cited academic papers…