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Transactions Costs, Inflation, and the Variety of Intermediation Services

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  • Williamson, Stephen D

Abstract

A general-equilibrium model with fixed costs of financial intermediation and costs of transacting with intermediaries is constructed. This model is used to show that ignoring fixed costs of in termediation is not innocuous in Tobin-Baumol-type transactions cost models of money demand. Deflation is optimal in spite of the fact that an increase in inflation reduces nominal interest rates and may increase the transactions costs incurred by all groups of economic agents. Changes in reserve requirements have ambiguous effects. The authors obtain novel results due to the fact that the variety of intermediation services is affected by government intervention. Copyright 1987 by Ohio State University Press.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 19 (1987)
Issue (Month): 4 (November)
Pages: 484-98

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Handle: RePEc:mcb:jmoncb:v:19:y:1987:i:4:p:484-98

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Amable, Bruno & Chatelain, Jean-Bernard & De Bandt, Olivier, 1998. "Stability versus efficiency of the banking sector and economic growth," CEPREMAP Working Papers (Couverture Orange) 9811, CEPREMAP.
  2. Bruno Amable & Jean-Bernard Chatelain & Olivier De Bandt, 2002. "Optimal capacity in the banking sector and economic growth," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00112535, HAL.
  3. Sherrill Shaffer, 2008. "Earnings Valuation And Sources Of Growth," CAMA Working Papers 2008-32, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Hyytinen, A. & Takalo, T., 2000. "Enhancing Bank Transparency: a Re-assessment," University of Helsinki, Department of Economics 492, Department of Economics.
  5. Hyytinen, Ari, 2001. "Information Production, Banking Competition and the Market Structure of the Banking Industry," Discussion Papers 749, The Research Institute of the Finnish Economy.
  6. Hyytinen, Ari, 2003. "Information production and lending market competition," Journal of Economics and Business, Elsevier, vol. 55(3), pages 233-253.
  7. Hyytinen, Ari & Pajarinen, Mika, 2001. "Financial Systems and Venture Capital in Nordic Countries: A comparative Study," Discussion Papers 774, The Research Institute of the Finnish Economy.
  8. Bruno Amable & Jean-Bernard Chatelain & Olivier De Bandt, 2002. "Optimal capacity in the banking sector and economic growth," Post-Print halshs-00112535, HAL.

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