Do Smart Depositors Avoid Inefficient Bank Runs? An Experimental Study

Emerging Markets Finance and Trade. 2023. Vol. 59. No. 8. P. 2710–2726.

Semenova M.

This paper investigates whether being smart makes depositors less prone to getting involved in a bank run. We conduct a series of experiments with students, modeling the a-la Diamond-Dybvig deposit market with liquidity shocks, changing macroeconomic conditions, and risk-based investment technologies. Our results suggest that smarter depositors – those having better academic achievements – choose the strategy of avoiding early withdrawals more frequently, adding to the evidence that higher financial literacy may prevent coordination failures in deposit markets. We also suggest that panic withdrawals are more probable in markets with poorer economic conditions, but depositors show weak sensitivity to bank investment risks.

Keywords: финансовая грамотность, академические достижения, bank runs, набег вкладчиков, academic achievements, financial literacy

Publication based on the results of: Regional Economic and Financial Development Diversity: Institutional Analysis of Variation Determinants, External Shocks Impact, and Regulatory Policies’ Efficiency (2023)