Bank capital standards for market risk: a welfare analysis

David Marshall and Subu Venkataraman

No WP-97-09, Working Paper Series, Issues in Financial Regulation from Federal Reserve Bank of Chicago

Abstract: We develop a model of commodity money and use it to analyze the following two questions motivated by issues in monetary history: What are the conditions under which Gresham's Law holds? And, what are the mechanics of a debasement (lowering the metallic content of coins)? The model contains light and heavy coins, imperfect information, and prices determined via bilateral bargaining. There are equilibria with neither, both, or only one type of coin in circulation. When both circulate, coins may trade by weight or by tale. We discuss the extent to which Gresham's Law holds in the various cases. Following a debasement, the quantity of reminting depends on the incentives oered by the sovereign. Equilibria exist with positive seigniorage and a mixture of old and new coins in circulation.

Keywords: Risk; Bank capital (search for similar items in EconPapers)
Date: 1997
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.chicagofed.org/digital_assets/publicati ... pers/1997/wp97_9.pdf (application/pdf)

Related works:
Journal Article: Bank Capital Standards for Market Risk: A Welfare Analysis (1999)
Working Paper: Bank capital standards for market risk: a welfare analysis (1997)
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:fip:fedhfi:wp-97-09

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series, Issues in Financial Regulation from Federal Reserve Bank of Chicago Contact information at EDIRC.
Bibliographic data for series maintained by Lauren Wiese ().