NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Systematic Banking Collapse in a Perfect Foresight World

Robert P. Flood, Peter M. Garber

NBER Working Paper No. 691
Issued in June 1981
NBER Program(s):   EFG

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.

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Document Object Identifier (DOI): 10.3386/w0691

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