Will Technology Innovation Result in Bank Runs? - A New Prospective of Bank Runs

Abstract

Bank runs are always associated with economy failure and investor panic in the literature. This paper explores the relationship between technology innovation and bank runs in a general equilibrium model. Intuitively, in a stable economy, which says no technology innovation, the return of capital accumulation is constant. But the return is subject to change when innovation happens and as a result, interest rates will change with return of investment. I point out that these changes are possible to result in banks run when some conditions are satisfied.