Financial intermediation and equity investment with costly monitoring

Giorgio Di Giorgio

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper studies the efficiency of equilibria in a productive OLG economy where the process of financial intermediation is characterized by costly state verification. Both competitive equilibria and Constrained Pareto Optimal allocations are characterized. It is shown that market outcomes can be socially inefficient, even when a weaker notion than Pareto optimality is considered.

Keywords: Financial intermediation; costly state verification; Constrained Pareto Optimality (search for similar items in EconPapers)
JEL-codes: E44 E62 (search for similar items in EconPapers)
Date: 1999-09
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:410

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