IDEAS home Printed from https://ideas.repec.org/p/gua/wpaper/ec200301.html
   My bibliography  Save this paper

Financial Intermediation and Credit Market Equilibrium: A Model of Matching Market

Author

Listed:
  • Kaniska Dam

    (Department of Economics and Finance, Universidad de Guanajuato
    Department of Economics, University of Edinburgh)

Abstract

We analyse an incentive model of financial market where intermediaries with different monitoring technologies are matched with firms with different levels of initial wealth and a proeject. Firms do not have sufficient wealth to cover the project costs and hence, seek external financing. The intermediaries are the potential investors in the market. We model the financial economy as a two-sided matching game and analyse the equilibrium using stability as a solution concept. In equilibrium, the financial contracts are optimal, and payoffs consumed by firms and intermediaries are endogenous. We also show that, in equilibrium, poorer firms have to rely on more informed capital available in the market and suffer from more intensive monitoring.

Suggested Citation

  • Kaniska Dam, 2003. "Financial Intermediation and Credit Market Equilibrium: A Model of Matching Market," Department of Economics and Finance Working Papers EC200301, Universidad de Guanajuato, Department of Economics and Finance.
    • Handle: RePEc:gua:wpaper:ec200301
    as

    Download full text from publisher

    File URL: http://economia.ugto.org/WorkingPapers/EC200301.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kaniska Dam & David Pérez-Castrillo, 2003. "Equilibrium Limited Liability Contracts in a Landlord-Tenant Market," Working Papers 99, Barcelona School of Economics.

    More about this item

    Keywords

    Financial Intermediation; Moral Hazard; Negatively Assorted Matching;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:gua:wpaper:ec200301. 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: Luis Sanchez Mier (email available below). General contact details of provider: https://edirc.repec.org/data/eeugtmx.html .

    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.