Bank Runs Across a Century: Evaluating Policy Changes and Public Behaviour

Abstract

This paper offers a comprehensive analysis of bank runs, tracing their evolution from the Great Depression to the COVID-19 pandemic. It explores the fundamental concept of bank runs, their shifting causes and consequences over the past century, and the role of public psychology in exacerbating these events. The paper highlights how the general public’s reactions can significantly influence the course of a bank run, noting how panic triggered by news of a bank run can rapidly escalate, causing individuals to rush to withdraw their funds and potentially creating widespread chaos and distress. Furthermore, the paper examines how policy adjustments and new implementations address public psychology and attempt to mitigate the risk of bank runs. It includes detailed assessments of the evolution of the FDIC and capital controls in response to various financial crises. Overall, the paper provides a focused analysis of the historical context and policy responses, evaluating them in relation to different financial crises over time.