WHEN PRIME DEPOSITORS RUN ON THE BANKS: A BEHAVIORAL APPROACH

  • Natanael Waraney Gerald Massie Universitas Indonesia
  • Chaikal Nuryakin Universitas Indonesia
Keywords: Withdrawal Decision, Time Preference, Risk Preference, Bank Run, Prime Depositor

Abstract

This paper examines the effect of two psychological attributes, namely an individual’s risk and time preference, on withdrawal decisions. Our sample is a pool of prime depositors in Indonesia, mainly due to the country’s deposit market being heavily concentrated on such depositors. We find that most of the prime depositors are risk averse long-term depositors. The regression results show that there is a significant correlation between the decision to withdraw and individual risk and time preference in most economic shock scenarios. The study concludes that a bank-run could happen if the rupiah depreciates by approximately 27% (from Rp 13,436 to Rp 17,000) and when there is a medium or a large bank failure.

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Published
2020-02-29
How to Cite
Massie, N., & Nuryakin, C. (2020). WHEN PRIME DEPOSITORS RUN ON THE BANKS: A BEHAVIORAL APPROACH. Buletin Ekonomi Moneter Dan Perbankan, 23(1), 139 - 152. https://doi.org/10.21098/bemp.v23i1.954
Section
Articles