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Marcela Giraldo


This paper evaluates the incentives that banks have to herd. It includes a complete literature review that focuses on papers from the last fifteen years, and a model of several banks and infinite time periods. The literature review looks at recent academic papers that have examined the different causes of bank herding. The model is discussed theoretically and then a numerical example explores the significance of its coefficients. The model section concludes that any policy that reduces the costs of overinvestment increases the incentives of banks to herd.

Key Words: Banks, Herding, Banks’ Incentives

How to cite this paper: Giraldo, M. (2012). Banks’ incentives to over-herd. Journal of Governance and Regulation, 1(2), 86-91.