Bank Deposit Contracts Versus Financial Market Participation in Emerging Economies
No 201334, Working Papers from University of Pretoria, Department of Economics
The financial sector of emerging economies in Africa is characterized by a non-competitive banking sector which dominates any direct participation of agents in asset markets. Based on a variant of Diamond and Dybvig's (1983) model of financial intermediation, we formally explain both stylized facts through market inexperience of agents in emerging economies. While experienced agents correctly predict future market clearing equilibrium prices, inexperienced agents are ignorant about future market equilibria. As a consequence, a monopolistic banking sector can exploit these agents because their only outside option is an autarkic investment project.
Keywords: Emerging Economies; Demand Deposit Contract; Asset Market; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: O16 G14 G21 (search for similar items in EconPapers)
Pages: 24 pages
New Economics Papers: this item is included in nep-afr, nep-ban, nep-cta, nep-cwa and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: Bank-Deposit Contracts Versus Financial-Market Participation in Emerging Economies (2015)
Working Paper: Bank Deposit Contracts Versus Financial Market Participation in Emerging Economies (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201334
Access Statistics for this paper
More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().