Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Domestic and International Effects of Financial Deregulation

Contents:

Author Info

  • Viktors Stebunovs

    (Board of Governors of the Federal Reserve System)

  • Fabio Ghironi

    (Boston College)

Abstract

This paper studies the domestic and international effects of financial deregulation in a dynamic, stochastic, general equilibrium model with endogenous producer entry. We model deregulation as a decrease in the monopoly power of financial intermediaries. We show that the economy that deregulates experiences producer entry, real exchange rate appreciation, and a current account deficit. The rest of the world experiences a long-run increase in consumption and an expansion in the number of domestic producers. Less monopoly power in financial intermediation results in less volatile business creation, reduced markup countercyclicality, and weaker substitution effects in labor supply in response to productivity shocks. Financial deregulation thus contributes to a moderation of firm-level and aggregate output volatility. In turn, trade and financial ties between the two countries allow the foreign economy to enjoy lower volatility as well. The results of the model are consistent with features of U.S. and international data following the U.S. banking deregulation started in 1977.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economicdynamics.org/meetpapers/2008/paper_676.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 676.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:red:sed008:676

Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Email:
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC

Related research

Keywords:

References

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.:
as in new window
  1. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers, Center for Economic Studies, U.S. Census Bureau 00-08, Center for Economic Studies, U.S. Census Bureau.
  2. Gonzalez-Maestre, M. & Granero, L.M., 1997. "Industrial Loans and Market Structure," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 396.97, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Caballero, Ricardo J & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2006. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," Center for International and Development Economics Research, Working Paper Series, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkele qt7xc0g8mm, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  4. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Working Papers 12354, National Bureau of Economic Research, Inc.
  5. Comin, D. & Gertler, M., 2003. "Medium Term Business Cycles," Working Papers, C.V. Starr Center for Applied Economics, New York University 03-05, C.V. Starr Center for Applied Economics, New York University.
  6. Cestone, Giacinta & White, Lucy, 2002. "Anti-Competitive Financial Contracting: The Design of Financial Claims," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3182, C.E.P.R. Discussion Papers.
  7. Fogli, Alessandra & Perri, Fabrizio, 2006. "The 'Great Moderation' and the US External Imbalance," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6010, C.E.P.R. Discussion Papers.
  8. Yang, Xiaokai & Heijdra, Ben J, 1993. "Monopolistic Competition and Optimum Product Diversity: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 295-301, March.
  9. Nicola Cetorelli & Philip E. Strahan, 2004. "Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets," NBER Working Papers 10832, National Bureau of Economic Research, Inc.
  10. Benjamin Hunt & Alessandro Rebucci, 2005. "The US Dollar and the Trade Deficit: What Accounts for the Late 1990s?," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 8(3), pages 399-434, December.
  11. Enrique G. Mendoza, 2007. "Financial Integration, Financial Deepness and Global Imbalance," 2007 Meeting Papers, Society for Economic Dynamics 746, Society for Economic Dynamics.
  12. Vivien Lewis, 2006. "Macroeconomic fluctuations and firm entry: theory and evidence," Computing in Economics and Finance 2006, Society for Computational Economics 112, Society for Computational Economics.
  13. De Bandt, Olivier & Davis, E. Philip, 2000. "Competition, contestability and market structure in European banking sectors on the eve of EMU," Journal of Banking & Finance, Elsevier, Elsevier, vol. 24(6), pages 1045-1066, June.
  14. Ricardo J. Caballero, 2006. "On the Macroeconomics of Asset Shortages," NBER Working Papers 12753, National Bureau of Economic Research, Inc.
  15. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 195-232.
  16. Sandra E. Black & Philip E. Strahan, 2002. "Entrepreneurship and Bank Credit Availability," Journal of Finance, American Finance Association, American Finance Association, vol. 57(6), pages 2807-2833, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Beatriz de Blas & Katheryn Russ, 2010. "FDI in the Banking Sector," Working Papers, University of California, Davis, Department of Economics 108, University of California, Davis, Department of Economics.
  2. Sven Blank, 2009. "Research Note on "International Consumption Risk Sharing and Monetary Policy"," Working Paper / FINESS, DIW Berlin, German Institute for Economic Research 4.3, DIW Berlin, German Institute for Economic Research.
  3. repec:diw:diwfin:diwfin04030 is not listed on IDEAS

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:red:sed008:676. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.