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Financial Intermediation Versus Stock Markets in a Dynamic Intertemporal Model


  • Sudipto Bhattacharya
  • Paolo Fulghieri
  • Riccardo Rovelli


We consider the transitions among intragenerational and alternative intergenerational financing and liquidity risk sharing mechanisms, in an overlapping generations model with endogenous levels of long-lived investments. The existence and characterization of a self-sustaining mechanism, stable across generations, is established. The long-run equilibrium outcome, in a proposal game across generations, is shown to depend on the risk aversion and propensity for early liquidity needs of the agents.

Suggested Citation

  • Sudipto Bhattacharya & Paolo Fulghieri & Riccardo Rovelli, 1998. "Financial Intermediation Versus Stock Markets in a Dynamic Intertemporal Model," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(1), pages 291-291, March.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199803)154:1_291:fivsmi_2.0.tx_2-j

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    References listed on IDEAS

    1. Hart, Oliver, 1995. "Corporate Governance: Some Theory and Implications," Economic Journal, Royal Economic Society, vol. 105(430), pages 678-689, May.
    2. Baker, Malcolm & Wurgler, Jeffrey, 2013. "Behavioral Corporate Finance: An Updated Survey," Handbook of the Economics of Finance, Elsevier.
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    Cited by:

    1. Xavier Freixas & Dimitrios P. Tsomocos, 2004. "Book vs. fair value accounting in banking and intertemporal smoothing," Economics Working Papers 771, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Alejandro Gaytan & Romain Rancière, 2001. "Banks, liquidity crises and economic growth," Economics Working Papers 853, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2003.
    3. Dwyer Jr., Gerald P. & Samartín, Margarita, 2009. "Why do banks promise to pay par on demand?," Journal of Financial Stability, Elsevier, vol. 5(2), pages 147-169, June.
    4. Sharon K. Blei, 2007. "Investigating output cycles under two alternative financial systems," Supervisory Policy Analysis Working Papers 2007-04, Federal Reserve Bank of St. Louis.
    5. Jos van Bommel, 2007. "Endogenous Cycles and Liquidity Risk," Money Macro and Finance (MMF) Research Group Conference 2006 149, Money Macro and Finance Research Group.
    6. Hasman, Augusto & Samartín, Margarita & van Bommel, Jos, 2014. "Financial intermediation in an overlapping generations model with transaction costs," Journal of Economic Dynamics and Control, Elsevier, vol. 45(C), pages 111-125.
    7. Alejandro Gaytan & Romain Ranciere, 2004. "Wealth, Financial Intermediation and Growth," Working Papers 191, Barcelona Graduate School of Economics.
    8. Ioannis Lazopoulos, 2005. "Cycles And Banking Crisis," Money Macro and Finance (MMF) Research Group Conference 2005 15, Money Macro and Finance Research Group.
    9. Fulghieri, Paolo & Rovelli, Riccardo, 1998. "Capital markets, financial intermediaries, and liquidity supply," Journal of Banking & Finance, Elsevier, vol. 22(9), pages 1157-1180, September.
    10. Juha-Pekka Niinimäki, 2010. "Liquidity Creation without Bank Panics and Deposit Insurance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(3), pages 521-547, September.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General


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