Abstract
I study an infinite-horizon banking model with asset-side runs on credit lines. Strategic complementarity between bankers and credit line borrowers arises from contract contingency and the bank balance sheet channel: borrowers' panic drawdowns and bankers' liquidity rationing reinforce each other, leading to a vicious cycle. Using data from U.S. banks, I estimate the model and quantify the amplification effect of the strategic complementarity. This amplification mechanism accounts for a quarter of the overall liquidity shortfalls during the 2008-09 crisis.
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