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Informational rents in interbank Competition

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Author Info

  • Paolo G. GARELLA

    (University of Bologna & I.G.I.E.R.- Bocconi)

Abstract

The present paper develops a two-period, simple model of inter- bank competition based on the idea that banks can partially control the behaviour of borrowers. The control effort by one bank over its customers is not observable by competitor banks. It is shown that the equilibrium behaviour of banks is characterised by a distorted incentive to exert the control effort. A second implication of the model is that unexpected tightening of the interest rate policy by the Central Bank increases the banks' liabilities and thereby influences their loan policy. It is also shown that the returns from control are lower if banks expect that the economy be hit by a negative shock.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 1996011.

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Length: 17
Date of creation: 01 Mar 1996
Date of revision:
Handle: RePEc:ctl:louvre:1996011

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Cited by:
  1. Djedidi-Kooli, Salima, 2009. "L’accès au financement des PME en France : quel rôle joué par la structure du système bancaire ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/8354 edited by Etner, François.
  2. Tlili, Rim, 2012. "Comment justifier la multibancarité au sein des PME ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/10919 edited by Etner, François.
  3. Hamadi FakhFakh & Rim Zouari-Hadiji, 2011. "Dettes financières et investissement en R&D:une étude comparative," Working Papers CREGO 1110302, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.

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