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The Institutionalization of Savings: A Role for Monetary Policy

Author

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  • Edgar Ghossoub

    (The University of Texas at San Antonio)

Abstract

A signi?cant amount of evidence highlights the important role of ?- nancial intermediaries for economic development and growth. Despite all the bene?ts from ?nancial intermediation, the level of participation in ?nancial institutions varies signi?cantly across countries. In particular, the usage of banks is much lower in less developed economies. Notably, less developed economies share many common characteristics including low-income per person, high average in?ation rates, high degrees of ex- posure to liquidity risk, and high banking fees. I present a monetary growth model with important functions of ?at money and where ?nan- cial intermediaries form endogenously to mitigate various market frictions such as liquidity risk and transactions costs. I demonstrate that all the unfavorable features of less developed economies listed above discourage people from intermediating their savings and hamper ?nancial sector per- formance.

Suggested Citation

  • Edgar Ghossoub, 2009. "The Institutionalization of Savings: A Role for Monetary Policy," Working Papers 0001, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0004eco
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary Policy; Financial Intermediation; Liquidity Risk; Economic Development;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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