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Taxation of banks: A theoretical framework

The goal of this paper is to develop a model of financial intermediation analyze the impact of various forms of taxation. The model considers in a unified framework various functions of banks: monitoring, transaction services and asset transformation. Particular attention is devoted to conditions for separability between deposits and loans. The analysis focuses on: (i) competition between banks and alternative financial arrangements (investment funds and organized security markets), (ii) regulation, and (iii) bank's monopoly power and risk taking behavior.

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Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 525.02.

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Length: 49
Date of creation: 01 Jun 2002
Date of revision:
Handle: RePEc:aub:autbar:525.02
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  3. Loretta J. Mester & Leonard I. Nakamura & Micheline Renault, 2002. "Checking Accounts and Bank Monitoring," Center for Financial Institutions Working Papers 99-02, Wharton School Center for Financial Institutions, University of Pennsylvania.
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  7. Chiappori, P.A. & Perez-Castrillo, D. & Verdier, T., 1992. "Spatial Competition in the Banking System: Localization, Cross Subsidies and the Regulation of Deposit Rates," DELTA Working Papers 92-15, DELTA (Ecole normale supérieure).
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  15. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
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  17. Chia, Ngee-Choon & Whalley, John, 1999. "The Tax Treatment of Financial Intermediation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(4), pages 704-19, November.
  18. Allen, Franklin & Santomero, Anthony M., 2001. "What do financial intermediaries do?," Journal of Banking & Finance, Elsevier, vol. 25(2), pages 271-294, February.
  19. Bacchetta, Philippe & Caminal, Ramon, 1992. "Optimal seigniorage and financial liberalization," Journal of International Money and Finance, Elsevier, vol. 11(6), pages 518-538, December.
  20. Ramon Caminal & Carmen Matutes, 2002. "Can competition in the credit market be excessive?," UFAE and IAE Working Papers 527.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  21. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
  22. Dermine, J., 1986. "Deposit rates, credit rates and bank capital : The Klein-Monti Model Revisited," Journal of Banking & Finance, Elsevier, vol. 10(1), pages 99-114, March.
  23. Jeremy C. Stein, 1995. "An Adverse Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy," NBER Working Papers 5217, National Bureau of Economic Research, Inc.
  24. Matutes, Carmen & Vives, Xavier, 2000. "Imperfect competition, risk taking, and regulation in banking," European Economic Review, Elsevier, vol. 44(1), pages 1-34, January.
  25. Matutes, Carmen & Vives, Xavier, 1996. "Competition for Deposits, Fragility, and Insurance," Journal of Financial Intermediation, Elsevier, vol. 5(2), pages 184-216, April.
  26. Diamond, Douglas W, 1997. "Liquidity, Banks, and Markets," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 928-56, October.
  27. Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January.
  28. James, Christopher, 1987. "Some evidence on the uniqueness of bank loans," Journal of Financial Economics, Elsevier, vol. 19(2), pages 217-235, December.
  29. Caminal, Ramon, 1997. "Financial intermediation and the optimal tax system," Journal of Public Economics, Elsevier, vol. 63(3), pages 351-382, February.
  30. Caminal, R. & Bacchetta, P., 1992. "A Note on Reserve Requirements and Public Finance," UFAE and IAE Working Papers 176.92, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  31. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  32. Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
  33. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  34. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-78, June.
  35. Poddar, Satya & English, Morley, 1997. "Taxation of Financial Services Under a Value-Added Tax: Applying the Cash-Flow Approach," National Tax Journal, National Tax Association, vol. 50(1), pages 89-111, March.
  36. Caminal, Ramon & Matutes, Carmen, 2002. "Market power and banking failures," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1341-1361, November.
  37. Fuerst, Timothy S, 1994. "Monetary Policy and Financial Intermediation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 362-76, August.
  38. Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
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