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Monopolistic Pricing in the Banking Industry: a Dynamic Model

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Author Info
Enzo Dia () (Department of Economics, University of Milan-Bicocca and University of Strathclyde)
Abstract

This work develops a portfolio model of the banking firm where both the size and composition of the portfolio are jointly determined. The model provides a micro-foundation of the credit channel of transmission of monetary policy. It allows to analise the pricing policies of the banking firm, and shows how interest rate shocks and credit quality shocks (the real shocks that change expected default costs) affect the equilibrium level of loans and deposits. Besides it shows the factors affecting the provision of insurance services by means of the smoothing of shocks.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper73.pdf
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File Function: First version, 2004
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Publisher Info
Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 73.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 29 pages
Date of creation: May 2004
Date of revision: May 2004
Handle: RePEc:mib:wpaper:73

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  1. Hess, Alan C, 1991. "The Effects of Transaction Costs on Households' Financial Asset Demands," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 383-409, August. [Downloadable!] (restricted)
  2. Thistle, Paul D. & McLeod, Robert W. & Conrad, B. Lynne, 1989. "Interest rates and bank portfolio adjustments," Journal of Banking & Finance, Elsevier, vol. 13(1), pages 151-161, March. [Downloadable!] (restricted)
  3. Cosimano, Thomas F. & McDonald, Bill, 1998. "What's different among banks?," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 57-70, February. [Downloadable!] (restricted)
  4. Steve Salop, 1976. "Information and monopolistic competition," Special Studies Papers 74, Board of Governors of the Federal Reserve System (U.S.).
  5. Fried, Joel & Howitt, Peter, 1980. "Credit Rationing and Implicit Contract Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 471-87, August. [Downloadable!] (restricted)
  6. Cosimano, Thomas F, 1987. "The Federal Funds Market under Bank Deregulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(3), pages 326-39, August. [Downloadable!] (restricted)
  7. Berger, Allen N & Udell, Gregory F, 1992. "Some Evidence on the Empirical Significance of Credit Rationing," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 1047-77, October. [Downloadable!] (restricted)
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  8. Osborne, Dale K, 1982. "The Cost of Servicing Demand Deposits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 479-93, November. [Downloadable!] (restricted)
  9. Chari, V V & Christiano, Lawrence J & Eichenbaum, Martin, 1995. "Inside Money, Outside Money, and Short-Term Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1354-86, November. [Downloadable!] (restricted)
    Other versions:
  10. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-87, September. [Downloadable!] (restricted)
    Other versions:
  11. Wheelock, David C. & Wilson, Paul W., 2001. "New evidence on returns to scale and product mix among U.S. commercial banks," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 653-674, June. [Downloadable!] (restricted)
    Other versions:
  12. Cosimano, Thomas F., 1988. "The banking industry under uncertain monetary policy," Journal of Banking & Finance, Elsevier, vol. 12(1), pages 117-139, March. [Downloadable!] (restricted)
  13. Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, vol. 81(4), pages 938-45, September. [Downloadable!] (restricted)
  14. Flannery, Mark J, 1982. "Retail Bank Deposits as Quasi-Fixed Factors of Production," American Economic Review, American Economic Association, vol. 72(3), pages 527-36, June. [Downloadable!] (restricted)
  15. Sprenkle, Case M, 1969. "The Uselessness of Transactions Demand Models," Journal of Finance, American Finance Association, vol. 24(5), pages 835-47, December. [Downloadable!] (restricted)
  16. Douglas W. Diamond & Raghuram G. Rajan, 1999. "Liquidity Risk, Liquidity Creation and Financial Fragility: A Theory of Banking," NBER Working Papers 7430, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January. [Downloadable!] (restricted)
  18. Salop, Steven, 1976. "Information and Monopolistic Competition," American Economic Review, American Economic Association, vol. 66(2), pages 240-45, May. [Downloadable!] (restricted)
  19. Hess, Alan C, 1995. "Portfolio Theory, Transaction Costs, and the Demand for Time Deposits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1015-32, November. [Downloadable!] (restricted)
  20. Cosimano, Thomas F. & Van Huyck, John B., 1989. "Dynamic monetary control and interest rate stabilization," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 53-63, January. [Downloadable!] (restricted)
  21. English, William B., 1999. "Inflation and financial sector size," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 379-400, December. [Downloadable!] (restricted)
  22. Sprenkle, Case M, 1972. "On the Observed Transactions Demand for Money," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 40(3), pages 261-67, September.
  23. Hutchison, David E, 1995. "Retail Bank Deposit Pricing: An Intertemporal Asset Pricing Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 217-31, February. [Downloadable!] (restricted)
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