IDEAS home Printed from https://ideas.repec.org/a/bla/ecnote/v30y2001i3p491-507.html
   My bibliography  Save this article

Capital Requirements in a Financially Driven Business Cycle Model

Author

Listed:
  • Fabrizio Mattesini

Abstract

type="main" xml:lang="en"> We consider a simple overlapping generations economy where, because of asymmetric information and limited liability both in the loan and the deposits markets, firms have the incentive to undertake less efficient investment projects, while intermediaries have the incentive to monitor a smaller number of firms. Because of the positive relationship between the deposit interest rate and the level of monitoring, the lending activity of intermediaries may cause endogenous fluctuations in the level of economic activity. In this economy, a higher capital requirement, introduced to render deposit contracts incentive compatible, implies a higher steady state stock of capital, fewer bankruptcies among intermediaries and smaller fluctuations in the level of economic activity. (J.E.L. E32, D82, G28)

Suggested Citation

  • Fabrizio Mattesini, 2001. "Capital Requirements in a Financially Driven Business Cycle Model," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 30(3), pages 491-507, November.
    • Handle: RePEc:bla:ecnote:v:30:y:2001:i:3:p:491-507
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/1468-0300.00068
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecnote:v:30:y:2001:i:3:p:491-507. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0391-5026 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.