Model of banking behavior: specification and estimation

Shibata Tsubasa and Kosaka Hiroyuki

No 755, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This study aims to construct a model of the economic behavior of banks as intermediate sectors in macroeconomics that play an important role interplaying between financial and real markets based on a theoretical and empirical perspective. There are two distinguishing characteristics of our approach. First, we specify an economic model of banking behavior, following partially assets and liabilities management (ALM). As the primary object of our paper is to provide an understanding of a bank’s role in macroeconomics rather than the details of ALM, we abstract from that concept and embed its crucial factors into the model specification. Second, we assume that banks have two optimization problems: profit maximization and asset allocation. Banks are assumed to maximize the profit function which takes into consideration items of the balance sheet and income statement. Then, banks are assumed to attempt to determine their optimal portfolio. Although our model is remarkably simple, we consider that our framework is valid to illustrate the mechanism of the loan market.

Keywords: Banking Behavior; Loan Market; Asset and Liability Management; Asset Allocation; Banks (search for similar items in EconPapers)
JEL-codes: G00 G11 G21 (search for similar items in EconPapers)
Date: 2019-04
References: Add references at CitEc
Citations:

Published in IDE Discussion Paper = IDE Discussion Paper, No. 755. 2019-04

Downloads: (external link)
https://ir.ide.go.jp/record/50879/files/IDP000755_001.pdf First version, 2019 (application/pdf)

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:jet:dpaper:dpaper755

Ordering information: This working paper can be ordered from
Publication Office, IDE 3-2-2 Wakaba, Mihama-ku, Chiba-shi, Chiba 261-8545 JAPAN
http://www.ide.go.jp/English/Publish/Order

Access Statistics for this paper

More papers in IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO) Contact information at EDIRC.
Bibliographic data for series maintained by Michitaka Imamitsu ().