Optimal Liquidity Provision Through a Demand Deposit Scheme: The Jacklin Critique Revisited
AbstractWe derive conditions such that optimal liquidity provisions through a demand deposit scheme can be sustainably implemented in a subgame perfect Nash equilibrium under the assumption that renegade investors have free access to ex-post asset markets. As our qualitative main finding we demonstrate that such sustainability is more likely for poor than for richÃâscheme participants in terms of future income. By establishing sustainability for low future income populations, our formal analysis therefore offers an important qualification of Jacklin's(1987) influential claim that an optimal demand deposit scheme is not sustainable whenever there exists the possibility of an ex-post asset market.
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Bibliographic InfoArticle provided by Verein für Socialpolitik in its journal German Economic Review.
Volume (Year): 14 (2013)
Issue (Month): 1 (02)
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Other versions of this item:
- Alexander Zimper, 2011. "Optimal liquidity provision through a demand deposit scheme: The Jacklin critique revisited," Working Papers 208, Economic Research Southern Africa.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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