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Monopolistic Pricing in the Banking Industry: a Dynamic Portfolio Model

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  • Enzo Dia

    (Università degli studi di Milano-Bicocca)

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Abstract

This work develops a portfolio model of the banking firm where both the size and composition of the portfolio are jointly determined. The model provides a quite simple micro-foundation of the credit channel of the transmission of monetary policy. It allows analysing the pricing policies of the banking firm, and shows how interest rate shocks and credit quality shocks (the real shocks that change expected default costs) affect the equilibrium level of loans and deposits.

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File URL: http://128.118.178.162/eps/fin/papers/0411/0411025.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0411025.

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Length: 51 pages
Date of creation: 11 Nov 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0411025

Note: Type of Document - pdf; pages: 51
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Web page: http://128.118.178.162

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  23. Steve Salop, 1976. "Information and monopolistic competition," Special Studies Papers 74, Board of Governors of the Federal Reserve System (U.S.).
  24. English, William B., 1999. "Inflation and financial sector size," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 379-400, December.
  25. Flannery, Mark J, 1994. "Debt Maturity and the Deadweight Cost of Leverage: Optimally Financing Banking Firms," American Economic Review, American Economic Association, vol. 84(1), pages 320-31, March.
  26. Thistle, Paul D. & McLeod, Robert W. & Conrad, B. Lynne, 1989. "Interest rates and bank portfolio adjustments," Journal of Banking & Finance, Elsevier, vol. 13(1), pages 151-161, March.
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  30. Flannery, Mark J, 1982. "Retail Bank Deposits as Quasi-Fixed Factors of Production," American Economic Review, American Economic Association, vol. 72(3), pages 527-36, June.
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