Contagious bank failures in a free banking system

P. Aghion, P. Bolton, M. Dewatripont

Research output: Contribution to journalArticleScientificpeer-review

45 Citations (Scopus)


This paper develops a model of an unregulated banking system based around a private clearing house arrangement. Whilst such a system may dominate one with a public safety net in reducing moral hazard in lending and therefore the scope for individual bank insolvency, it also increases the likelihood of contagious bank failures following a systemic shock or an aggregate liquidity shortage.
Original languageEnglish
Pages (from-to)713-718
Number of pages6
JournalEuropean Economic Review
Issue number4-6
Publication statusPublished - 2000


Dive into the research topics of 'Contagious bank failures in a free banking system'. Together they form a unique fingerprint.

Cite this