Bank runs, liquidity, and consumption smoothing

We have divided the literature on banking crises and liquidity into two parts – the pre-1983 literature and the post-1983 literature (Chapter 4). Consumption smoothing has played an important part in the post-1983 literature on banking crises and liquidity. We have not dealt with this so far in this book. In this chapter, we will see how our analysis so far helps deal with this important issue. We will see how consumption smoothing is linked to liquidity (and to other factors).