01784cas a2200241 a 4500 AALejournalIMF000409 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451951738 1018-5941 BD-DhAAL BD-DhAAL Blejer, Mario. Exogenous Shocks, Deposit Runs and Bank Soundness : A Macroeconomic Framework / Mario Blejer. Washington, D.C. : International Monetary Fund, 1997. 1 online resource (31 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students In a model where all banks are initially solvent, an exogenous shock affects confidence, causing a flight from deposits into domestic and foreign currency. Real interest rates increase unexpectedly, affecting firms and raising the share of the banks' nonperforming assets. This increase causes genuine solvency problems and accelerates the bank run. Policy simulations show that compensatory monetary policy (increasing currency supply when deposits fall) mitigates the bank run but causes inflation and external imbalances. Combining compensatory monetary policy with tight fiscal policies also slows the bank run and mitigates insolvency, but at a lower macroeconomic cost. A devaluation is shown to have little positive impact. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1997/091 Full text available on IMF http://elibrary.imf.org/view/journals/001/1997/091/001.1997.issue-091-en.xml IMF e-Library