Financial Intermediation, markets, and growth
AbstractThis paper contributes to the literature comparing the relative performance of financial intermediaries and markets by studying an environment in which a trade-off between risk sharing and growth arises endogenously. Financial intermediaries provide insurance to households against a liquidity shock. Households can also invest directly on a financial market if they pay a cost. In equilibrium, the ability of intermediaries to share risk is constrained by the market. Moreover, intermediaries invest less in the productive technology when they provide more risk-sharing. This creates a trade-off between risk-sharing and growth. We show the mix of intermediaries and market that maximizes welfare depend on parameter values
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 464.
Date of creation: 2004
Date of revision:
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Financial intermediation; financial markets; risk-shring; growth;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G20 - Financial Economics - - Financial Institutions and Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
- NEP-DGE-2004-08-02 (Dynamic General Equilibrium)
- NEP-FIN-2004-08-02 (Finance)
- NEP-MAC-2004-08-02 (Macroeconomics)
- NEP-MFD-2004-08-02 (Microfinance)
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, 1995.
"Financial Markets, Intermediaries, and Intertemporal Smoothing,"
Center for Financial Institutions Working Papers
95-02, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Allen, Franklin & Gale, Douglas, 1997. "Financial Markets, Intermediaries, and Intertemporal Smoothing," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 523-46, June.
- Franklin Allen & Douglas Gale, 1996. "Financial Markets, Intermediaries and Intertemporal Smoothing," Center for Financial Institutions Working Papers 96-33, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Franklin Allen & Douglas Gale, 1995. "Financial markets, intermediaries, and intertemporal smoothing," Working Papers 95-4, Federal Reserve Bank of Philadelphia.
- Fulghieri, Paolo & Rovelli, Riccardo, 1998. "Capital markets, financial intermediaries, and liquidity supply," Journal of Banking & Finance, Elsevier, vol. 22(9), pages 1157-1180, September.
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