On the Instability of Banking and other Financial Intermediation
Chao Gu,
Cyril Monnet,
Ed Nosal and
Randall Wright
Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft
Abstract:
Are ?financial intermediaries inherently unstable? If so, why? What does this suggest about government intervention? To address these issues we analyze whether model economies with financial intermediation are particularly prone to multiple, cyclic, or stochastic equilibria. Four formalizations are considered: a dynamic version of Diamond-Dybvig banking incorporating reputational considerations; a model with delegated investment as in Diamond; one with bank liabilities serving as payment instruments similar to currency in Lagos- Wright; and one with Rubinstein-Wolinsky intermediaries in a decentralized asset market as in Duffie et al. In each case we find, for different reasons, ?financial intermediation engenders instability in a precise sense.
Keywords: Banking; Financial Intermediation; Instability; Volatility (search for similar items in EconPapers)
JEL-codes: D02 E02 E44 G21 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
https://repec.vwiit.ch/dp/dp1902.pdf (application/pdf)
Related works:
Working Paper: On the instability of banking and other financial intermediation (2020) 
Working Paper: On the Instability of Banking and Other Financial Intermediation (2019) 
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:ube:dpvwib:dp1902
Access Statistics for this paper
More papers in Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft Contact information at EDIRC.
Bibliographic data for series maintained by Franz Koelliker ().