Bank Deposit Contracts Versus Financial Market Participation in Emerging Economies
AbstractThe financial sector of emerging economies in Africa is characterized by a non-competitive banking sector which dominates any direct participation of agents in asset markets. Based on a variant of Diamond and Dybvig's (1983) model of financial intermediation, we formally explain both stylized facts through market inexperience of agents in emerging economies. While experienced agents correctly predict future market clearing equilibrium prices, inexperienced agents are ignorant about future market equilibria. As a consequence, a monopolistic banking sector can exploit these agents because their only outside option is an autarkic investment project.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201334.
Length: 24 pages
Date of creation: Jul 2013
Date of revision:
Emerging Economies; Demand Deposit Contract; Asset Market; Asymmetric Information;
Other versions of this item:
- Alexander Zimper, 2013. "Bank Deposit Contracts Versus Financial Market Participation in Emerging Economies," Working Papers 354, Economic Research Southern Africa.
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-07-20 (Africa)
- NEP-ALL-2013-07-20 (All new papers)
- NEP-BAN-2013-07-20 (Banking)
- NEP-CTA-2013-07-20 (Contract Theory & Applications)
- NEP-CWA-2013-07-20 (Central & Western Asia)
- NEP-MIC-2013-07-20 (Microeconomics)
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