Associate professor Zhao Li , a researcher of the Base, has published a collaborative paper titled "Contagious Bank Runs and Committed Liquidity Support "  in Management Science

Abstract: In a crisis, regulators and private investors can find it difficult, if not impossible, to tell whether banks facing runs are insolvent or merely illiquid. We introduce such an information constraint into a global-games-based bank run model with multiple banks and aggregate uncertainties. The information constraint creates a vicious cycle between contagious bank runs and falling asset prices and limits the effectiveness of traditional emergency liquidity assistance programs. We explain how a regulator can set up committed liquidity support to contain contagion and stabilize asset prices even without information on banks' solvency, rationalizing some recent developments in policy practices.

Link: https://pubsonline.informs.org/doi/10.1287/mnsc.2021.4258

Teacher Profile

Zhao Li is an associate professor at the School of Finance, Zhongnan University of Economics and Law, and a researcher at the Innovation and Talent Base for Digital Technology and Finance. His research fields include Banking and Financial Regulation, Banking Theory, and Corporate Finance. The research papers are accepted by academic journals like Management Science, Journal of Economic Dynamics and Control. He has led a National Natural Science Foundation Youth project and has participated in a number of National Natural Science Foundation projects.