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Another Attempt to Explain an Illiquid Banking System: The Diamond and Dybvig Model With Sequential Service Taken Seriously

1988; Volume: 12; Issue: 4 Linguagem: Inglês

10.21034/qr.1241

2163-4378

Neil Wallace,

Economic Theory and Policy

To help readers understand Diamond and Dybvig's explanation of an illiquid banking system and my explanation of the sequential service constraint, I descrbe my model twice. First I describe the model in a more-or-less way and summarize its results. Although some of the results that distinguish my model from Diamond and Dybving's cannot be fully described in this context, the main ingredients of our models can. A more complete and necessarily more technical description of my model and results follows. This requires previous exposure to economic theory at the level of a rigorous intermediate microeconomics theory course and to calculus.