Loan-monitoring And Deposit-servicing By Commercial Banks In A Stationary Environment

John Hartwick

No 979, Working Paper from Economics Department, Queen's University

Abstract: We take up the hypothesis that risk premiums on equities are embodying the costs incurred by equity holders in monitoring the firms which they have invested in. This idea is a key ingredient in our construction of a two sector neoclassical model with widget producing firms and commercial banks. So-called user costs or interest rate spreads are key prices of commercial bank services in the model. Commercial banks produce deposit services (check-writing services or transactions services) and lending services to widget producers.

Keywords: National Accounting; Commercial Banking; Monitoring Activity; General Equilibrium (search for similar items in EconPapers)
JEL-codes: G21 P12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1999-01
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:979

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