A Theory of Linkage between Monetary Policy and Banking Failure in Developing Countries

Raulin Lincifort Cadet ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a model of the banking sector that maximize profit and an individual bank which is a price taker, in a developing country. The interest rate on treasury bills is included in the model to measure monetary policy. The mathematical expression of the probability of banking failure is calculated; And, I show that, in developing countries, a tightening monetary policy may induce efficient banking failure.

Keywords: Banking Failure; Monetary Policy; Interest Rate; Developing Countries (search for similar items in EconPapers)
JEL-codes: G23 G21 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
Date: 2006-12, Revised 2007-10
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:5497

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