Loan-Monitoring and Deposit-Servincing by Commercial Banks in a Stationary Environment

John M. Hartwick

No 979, Working Papers from Queen's University, Department of Economics

Abstract: We take up the hypothesis that risk premiums on equities are embodying the costs incurred by equity holders in monitoring the firms which they have invested in. This idea is a key ingredient in our construction of a two sector neoclassical model with widget producing firms and commercial banks. So-called user costs or interest rate spreads are key prices of commercial bank services in the model. Commercial banks produce deposit services (check-writing services or transactions services) and lending services to widget producers.

Keywords: Commercial Banking; Monitoring Activity; General Equilibrium; National Accounting (search for similar items in EconPapers)
JEL-codes: G21 P12 (search for similar items in EconPapers)
Date: 1999-01

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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:979

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