Summary Report of KIMAP Guest Lecture by Dr. Edmund Lou
On October 21st, 2025, Dr. Edmund Lou from the University of Auckland delivered a guest lecture at KIMAP on the topic “An Introduction to the Diamond–Dybvig Model.” Dr. Lou specializes in macroeconomics and banking theory, and his lecture introduced students to one of the most influential frameworks in modern financial economics—the Diamond–Dybvig model of bank runs, a Nobel Prize–winning contribution by Douglas Diamond and Philip Dybvig (1983).
The lecture began by outlining the fundamental role of banks in liquidity creation, showing how deposit contracts allow agents with different consumption preferences to share risk efficiently. Professor Lou explained how this same mechanism, however, also exposes the banking system to self-fulfilling runs, where depositors rush to withdraw funds simply because others are doing so. Using intuitive examples, he illustrated how multiple equilibria—one stable and one panic-driven—can emerge in this framework. The session combined theoretical clarity with policy relevance, helping students appreciate how micro-level coordination problems can lead to systemic instability.
Overall, Dr. Lou’s lecture was a highly engaging and insightful introduction to the economics of bank runs, bridging rigorous theory with practical lessons. It enriched the KIMAP curriculum by highlighting how fundamental research in economics can illuminate real-world financial phenomena.
