A model for financial intermediation and public intervention

Margarita Samartín

DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Abstract: Based on Chari and Jagannathan (1988), this paper models information-induced and "pure-panic" runs in an environment of risk-averse agents. In this framework, deposits are needed to provide insurance against investors' unexpected demand for liquidity and therefore, a role for a financial intermediary is justified. A welfare analysis of two traditional devices to prevent runs (namely, suspension of convertibility versus deposit insurance), is presented.

Keywords: Banking; Deposit; contracts; Deposit; insurance; Suspension; of; convertibility (search for similar items in EconPapers)
Date: 1997-04
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wbrepe:7037

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