Wholesale funding, bank runs and liquidity freezes in the 2007/8 financial crisis
The canonical model of banking crises by Diamond and Dybvik focuses on depositor runs which prompt a liquidity crisis. Such runs were largely absent in the 2007- 8 crisis but liquidity freezes played a central role. Discuss the innovation of wholesale funding. Discuss how traditional bank runs compare to the one that was witnessed during […]
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