Dynamic Banking: A Reconsideration
AbstractFinancially Intermediated and Stock Market consumption-investment allocations, with (and without) governmental interventions, are compared in a welfare sense in overlapping generations economies with ( and without) shocks to agentsâ international preferences. We show that, first, tax-subsidy schemes under the same informational requirements needed for financial intermediation to function, lead to stock market allocations that are identical, or superior, to those attained under financial intermediation. Second, we argue that the necessary interventions are qualitatively no different from those required to implement stationary optimal allocations in OLG models without uncertainty regarding agentsâ consumption preferences. Thus, we conclude that the provision of liquidity is tangential to stock market efficiency.
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Bibliographic InfoPaper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number 9413.
Length: 31 pages
Date of creation: 1994
Date of revision:
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Postal: Centro de Estudios Monetarios Y Financieros. Casado del Alisal, 5-28014 Madrid, Spain.
Web page: http://www.cemfi.es/
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FINANCIAL MARKET; BANKING;
Other versions of this item:
- Bhattacharya, S. & Padilla, A. Jorge, 1994. "Dynamic Banking : A Reconsideration," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1994031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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- Qian, Yiming & John, Kose & John, Teresa A., 2004. "Financial system design and liquidity provision by banks and markets in a dynamic economy," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 385-403, April.
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