Liquidity Provision And Banking Crises With Heterogeneous Agents
Incentive compatibility constraints that produce contracts where short-term funds choose not to deposit will prevent banking crises, but at the cost of losing the insurance function of banks. Restricting short-term deposits may not be optimal at all times, since the cost of doing so may be greater than the expected loss in allowing crises to occur with positive probability.
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Volume (Year): 13 (2009)
Issue (Month): S1 (May)
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