Transparency in the Interbank Market and the Volume of Bank Intermediated Loans
AbstractIn this paper we study the impact of more transparency in the interbank market on the volume of bank intermediated loans and on the profitability of the banking business. Transparency is modeled by means of the informational content of publicly observable signals correlated to the random interbank interest rate. We find that more transparency may increase or decrease the volume of bank loans. In particular, the impact of more transparency on the volume of loans depends on the curvature of the marginal cost function of the banking firm. Furthermore, we find that ex ante expected profits of the bank are higher when the interbank market is more transparent. --
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Bibliographic InfoPaper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 10/04.
Date of creation: 2004
Date of revision:
banking firm; interbank market; interest rate risk; hedging; transparency;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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