A Theory of Linkage between Monetary Policy and Banking Failure in Developing Countries
AbstractThis paper presents a model of the banking sector that maximize profit and an individual bank which is a price taker, in a developing country. The interest rate on treasury bills is included in the model to measure monetary policy. The mathematical expression of the probability of banking failure is calculated; And, I show that, in developing countries, a tightening monetary policy may induce efficient banking failure.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 5497.
Date of creation: Dec 2006
Date of revision: Oct 2007
Banking Failure; Monetary Policy; Interest Rate; Developing Countries;
Other versions of this item:
- Raulin L Cadet, 2009. "A theory of linkage between monetary policy and banking failure in developing countries," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 1(2), pages 143-154, May.
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-03 (All new papers)
- NEP-BAN-2007-11-03 (Banking)
- NEP-MAC-2007-11-03 (Macroeconomics)
- NEP-MON-2007-11-03 (Monetary Economics)
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.:
- David C. Wheelock & Paul W. Wilson, 2000.
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The Review of Economics and Statistics,
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"Corporate finance and the monetary transmission mechanism,"
Economics Working Papers
511, Department of Economics and Business, Universitat Pompeu Fabra.
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- Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 149-214.
- Marco Arena, 2005.
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05-19, Bank of Canada.
- Arena, Marco, 2008. "Bank failures and bank fundamentals: A comparative analysis of Latin America and East Asia during the nineties using bank-level data," Journal of Banking & Finance, Elsevier, vol. 32(2), pages 299-310, February.
- Zarruk, Emilio R. & Madura, Jeff, 1992. "Optimal Bank Interest Margin under Capital Regulation and Deposit Insurance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(01), pages 143-149, March.
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