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Stability versus efficiency of the banking sector and economic growth

Author

Listed:
  • Amable, Bruno
  • Chatelain, Jean-Bernard
  • De Bandt, Olivier

Abstract

The paper investigates, from the welfare and growth point of view, the existence of a trade-off between the stability and the efficiency of the banking system, studying the costs and benefits of regulatory programs. Welfare is considered in the context of an overlapping generation model with endogenous growth. There is horizontal differentiation and imperfect competition in the banking sector. Macroeconomic shocks affect the return on capital. We specify how deposit insurance may increase the number of deposits, welfare and growth. We characterize the conditions under which excess banking capacity may appear and how its reduction may improve welfare

Suggested Citation

  • Amable, Bruno & Chatelain, Jean-Bernard & De Bandt, Olivier, 1998. "Stability versus efficiency of the banking sector and economic growth," CEPREMAP Working Papers (Couverture Orange) 9811, CEPREMAP.
    • Handle: RePEc:cpm:cepmap:9811
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Michael D. Bordo & Angela Redish, 1996. "A Comparison of the Stability and Efficiency of the Canadian and American Banking Systems 1870-1925," NBER Historical Working Papers 0067, National Bureau of Economic Research, Inc.
    3. Carroll, Christopher D. & Weil, David N., 1994. "Saving and growth: a reinterpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 133-192, June.
    4. Chan, Yuk-Shee & Greenbaum, Stuart I & Thakor, Anjan V, 1992. "Is Fairly Priced Deposit Insurance Possible?," Journal of Finance, American Finance Association, vol. 47(1), pages 227-245, March.
    5. Bordo, Michael D. & Rockoff, Hugh & Redish, Angela, 1996. "A comparison of the stability and efficiency of the Canadian and American banking systems, 1870–19251," Financial History Review, Cambridge University Press, vol. 3(1), pages 49-68, April.
    6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    7. Bernard Bensaid & André De Palma, 1995. "Politique monétaire et concurrence bancaire," Annals of Economics and Statistics, GENES, issue 40, pages 161-176.
    8. repec:adr:anecst:y:1995:i:40:p:07 is not listed on IDEAS
    9. Besanko, David & Thakor, Anjan V., 1992. "Banking deregulation: Allocational consequences of relaxing entry barriers," Journal of Banking & Finance, Elsevier, vol. 16(5), pages 909-932, September.
    10. Casey B. Mulligan & Xavier Sala-i-Martin, 1995. "Adoption of financial technologies: Implications for money demand and monetary policy," Economics Working Papers 134, Department of Economics and Business, Universitat Pompeu Fabra.
    11. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
    12. Matutes, Carmen & Vives, Xavier, 1996. "Competition for Deposits, Fragility, and Insurance," Journal of Financial Intermediation, Elsevier, vol. 5(2), pages 184-216, April.
    13. Carr, Jack & Mathewson, Frank & Quigley, Neil, 1995. "Stability in the Absence of Deposit Insurance: The Canadian Banking System, 1890-1966," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1137-1158, November.
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    Cited by:

    1. K.P.V. O’Sullivan & Tom Kennedy, 2008. "Supervision of the Irish Banking System: A Critical Perspective," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(03), pages 20-26, October.
    2. Amable, Bruno, 1999. "Institutional complementarity and diversity of social systems of innovation and production," Discussion Papers, Research Unit: Economic Change and Employment FS I 99-309, WZB Berlin Social Science Center.
    3. repec:ces:ifodic:v:6:y:2008:i:3:p:14567232 is not listed on IDEAS

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    More about this item

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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