Imperial College London

Professor Franklin Allen

Business School

Executive Director of the Brevan Howard Centre



+44 (0)20 7594 9195f.allen Website CV




2.05B52-53 Prince's GateSouth Kensington Campus






BibTex format

author = {Allen, HF and Carletti, E and Goldstein, I and Leonello, A},
doi = {10.1016/j.jet.2018.06.007},
journal = {Journal of Economic Theory},
pages = {518--557},
title = {Government guarantees and financial stability},
url = {},
volume = {177},
year = {2018}

RIS format (EndNote, RefMan)

AB - Banks are intrinsically fragile because of their role as liquidity providers. This results in under-provision of liquidity. We analyze the effect of government guarantees on the interconnection between banks' liquidity creation and likelihood of runs in a global-game model, where banks' and depositors' behavior are endogenous and affected by the amount and form of guarantee. The main insight of our analysis is that guarantees are welfare improving because they induce banks to improve liquidity provision, although that sometimes increases the likelihood of runs or creates distortions in banks' behavior.
AU - Allen,HF
AU - Carletti,E
AU - Goldstein,I
AU - Leonello,A
DO - 10.1016/j.jet.2018.06.007
EP - 557
PY - 2018///
SN - 0022-0531
SP - 518
TI - Government guarantees and financial stability
T2 - Journal of Economic Theory
UR -
UR -
VL - 177
ER -