Financial Intermediaries and Transaction Costs
AbstractWe present an overlapping generations model with spatial separation and agents who face unsystematic liquidity risk. In a pure exchange economy, agents engage in life cycle portfolio rebalancing. In an intermediated economy, intergenerational banks or mutual funds cater to diversified clienteles so as to avoid rebalancing transactions. In equilibrium, these intermediaries pay redemptions with portfolio income and never sell secondary assets. We also find that the pure exchange economy has a downward sloping yield curve and is inherently cyclical.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2010-02.
Date of creation: Jan 2010
Date of revision:
Financial Intermediation; Overlapping Generations; Liquidity.;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-03 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ernst-Ludwig VON THADDEN, 1996. "Optimal Liquidity Provision and Dynamic Incentive Compatibility," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 9604, Université de Lausanne, Faculté des HEC, DEEP.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francesco Saraceno).
If references are entirely missing, you can add them using this form.