Financial Intermediaries and Transaction Costs

Augusto Hasman (), Margarita Samartin () and Jos van Bommel ()
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Margarita Samartin: Business Department, Universidad Carlos III de Madrid

No 2010-02, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: We present an overlapping generations model with spatial separation and agents who face unsystematic liquidity risk. In a pure exchange economy, agents engage in life cycle portfolio rebalancing. In an intermediated economy, intergenerational banks or mutual funds cater to diversified clienteles so as to avoid rebalancing transactions. In equilibrium, these intermediaries pay redemptions with portfolio income and never sell secondary assets. We also find that the pure exchange economy has a downward sloping yield curve and is inherently cyclical.

Keywords: Financial Intermediation; Overlapping Generations; Liquidity. (search for similar items in EconPapers)
JEL-codes: D91 E43 G21 (search for similar items in EconPapers)
Date: 2010-01
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1002

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