03 December 2024

CEPR: Two centuries of systemic bank runs

by Jamilov, König, Müller, Saidi: This column constructs two novel, cross-country databases on bank run events in 184 countries over 1800-2023 and bank sector outstanding deposits. It shows that the costs of systemic bank runs are substantial – real GDP is on average 9% below its pre-run trend.

Bank runs are notoriously difficult to measure systematically. This column constructs two novel, cross-country databases on bank run events in 184 countries over 1800-2023 and bank sector outstanding deposits. It shows that the costs of systemic bank runs are substantial – real GDP is on average 9% below its pre-run trend. These output losses are observed both in cases where runs are triggered by fundamental factors, such as a monetary policy shock, and non-fundamental factors. Policymakers can dampen the macroeconomic costs with liability guarantees and reduce the likelihood of runs becoming systemic with credible deposit insurance and a lender of last resort. 

Since the seminal work of Diamond and Dybvig (1983), bank run risk has remained a topic of critical importance for both academics and practitioners over the past four decades. The 2023 depositor run and failure of Silicon Valley Bank has further fuelled the interest among researchers and policymakers in understanding the economic and regulatory implications of banking panics (Admati et al. 2023, Beck et al. 2024). However, bank runs are notoriously difficult to measure systematically. Moreover, there is limited evidence on their incidence and implications across time and space.

In a recent paper (Jamilov et al. 2024), we make progress by constructing and making publicly available two novel, comprehensive cross-country databases. Data and additional materials are available at www.systemicbankruns.com. First, we put forth new narrative evidence on bank runs that includes 308 events in 184 countries over 1800-2023 and from 463 sources. Second, we assemble and harmonise a novel dataset of banking sectors’ outstanding deposits, allowing us to measure episodes of significant deposit withdrawals. The synergy of our qualitative, narrative-based identification of bank runs with a quantitative, statistical indicator of depositor withdrawals provides an unprecedented advancement in the measurement of bank run risk.

Table 1 provides a detailed comparison of our chronology with four canonical databases of banking crises: Baron et al. (2021), Laeven and Valencia (2018), Jorda et al. (2017), and Reinhart and Rogoff (2009)....

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