Communication Barriers in the Diamond-Dybvig Model: The Sequential-Service Constraint and Other Implications Öffentlichkeit Deposited

Creator Series Issue number
  • 370
Date Created
  • 1987-09
Abstract
  • The Diamond-Dybvig model of banking (Journal of Political Economy, 1983) is amended by introducing communication barriers—these being implicit in their model and in most explanations of why people hold so-called liquid assets. These barriers imply the sequential-service constraint that Diamond and Dybvig imposed on private intermediation and have other implications: infeasibility of the policy that Diamond and Dybvig identify with deposit insurance and desirability of dependence of the realized return on deposits on the random order of withdrawals.

Subject (JEL) Stichwort Date Modified
  • 07/15/2019
Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
Publisher
  • Federal Reserve Bank of Minneapolis
Resource type
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