Financial intermediation in the theory of the risk-free rate

François Marini

Journal of Banking & Finance, 2011, vol. 35, issue 7, 1663-1668

Abstract: This paper constructs a general equilibrium model of the interaction between financial intermediaries and financial markets that sheds some light on the short-term volatility of real interest rates. The main findings of the paper are as follows. When financial intermediaries issue contingent (non-contingent) liabilities, an increase in the consumers' relative risk aversion coefficient decreases (increases) the interest rate. Also, the interest rate rises when capitalists are less risk-averse and financial intermediaries are hit by a liquidity shock.

Keywords: Financial; intermediation; Financial; markets; Liquidity; preference; Risk; aversion; Risk-free; rate; Risk; sharing (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426610004383
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:7:p:1663-1668

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().