Endogenous probability of financial crises, lender of last resort, and the accumulation of international reserves
Bibliographic record
Abstract
In this paper, we use the global game approach to build a model of bank runs caused by aggregate liquidity shocks. We then use the model to analyze the motive of the central bank to build up international reserves as self-insurance against financial crisis. In the model, domestic banks collect deposits from foreign creditors and divide them between monetary reserves and long-term investments. Banks face stochastic aggregate withdrawal demand before the long-term projects are completed. If banks use up their own reserves and the reserves borrowed from the central bank, they must liquidate assets to meet the withdrawals. Since liquidation is costly, bank runs can happen because of self-fulfilling panics. We show that higher central bank reserves can reduce the likelihood of bank runs. We also find that the central bank’s incentive to accumulate reserve depends on the reserve held by the private sector. Finally, we show that high external borrowing cost will give central banks strong incentive to accumulate reserves to self-insure.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.008 |
| Meta-epidemiology (narrow) | 0.001 | 0.001 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.000 |
| Science and technology studies | 0.000 | 0.001 |
| Scholarly communication | 0.003 | 0.003 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.002 | 0.002 |
| Insufficient payload (model declined to judge) | 0.009 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".