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A monetary mechanism for sharing capital: Diamond and Dybvig meet Kiyotaki and Wright

Ricardo Cavalcanti

No 476, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: A model is presented in which banks accept deposits of fiat money and intermediate capital. Alt though theories about the coexistence of money and credit are inherently difficult, the model offers a simple explanation for the dual role of financial institutions: Banks are well monitored, and can credibly allow fiat-money withdraws to whom needs its, thus qualifying to become safe brokers of idle capital. The model shares some features with those of Diamond and Dybvig (1983) and Kiyotaki and Wright (1989).

Date: 2003-03-24
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (9)

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