Financial System Architecture: The Role of Systemic Risk, Added Value and Liquidity

Jose M P Jorge
Additional contact information
Jose M P Jorge: Universidade do Porto

No 155, Money Macro and Finance (MMF) Research Group Conference 2006 from Money Macro and Finance Research Group

Abstract: Risky investment projects make the coordination among small, uninformed investors hard to achieve, and generate inefficient low levels of investment. Several authors have pointed out the benefits to an economy from multiple avenues of financial intermediation. This paper explains endogenously different financial architectures and classifies them according to the capacity of financial intermediaries to reallocate risks and create added value. In some of these architectures, financial intermediaries improve coordination among agents by providing insurance over the primitive payoffs available in decentralized financial markets. This enhances efficiency and stabilizes the economy against fundamental shocks and confidence shifts. In other financial architectures financial intermediation plays a minor role or is unfeasible

Keywords: Banking; Financial System; Systemic Risk; Global Games (search for similar items in EconPapers)
JEL-codes: C72 E44 G21 G28 (search for similar items in EconPapers)
Date: 2007-02-02
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.org/mmf2006/up.16002.1150123028.pdf (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:mmf:mmfc06:155

Access Statistics for this paper

More papers in Money Macro and Finance (MMF) Research Group Conference 2006 from Money Macro and Finance Research Group
Bibliographic data for series maintained by Christopher F. Baum ().