This paper asks why deposit banks thrived in the late middle ages, but had virtually disappeared by 1600 and studies banking in Venice in order to answer the question. A model is developed that shows that a partial reserve banking system is an efficient means of allocating investment funds only if the returns from long-term investment are sufficient to both compensate the banker for the costs of running a bank and to offer depositors a return over what they can receive through market allocation. We argue that the collapse of deposit banking in Venice occurred because the returns from long term investment fell in the 16th century, while the costs of operating deposit banks remained high.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
For technical questions regarding this item, or to correct its listing, contact: (Sita Nataraj Slavov).
Related research
Keywords:
References listed on IDEAS 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.:
Franklin Allen & Douglas Gale, 1998.
"Optimal Financial Crises,"
Journal of Finance,
American Finance Association, vol. 53(4), pages 1245-1284, 08.
[Downloadable!] (restricted)
Did you know? All full texts are decentralized with the publishers, none reside on this server, thus making it possible to offer this service for free to all parties.