Tax-Financed Public Funds Injection into Banks and its Welfare Implications
I construct a model of a dynamic economy in which the government collects taxes and injects them into banks f capitals for stabilization of financial system. In theoretical part, I derive loan demand and supply functions from dynamic optimizing problems of households and banks. Carrying out a simulation, I show that the injection improves welfare in some first periods, although it rather aggravates in the long term. I also show that the injection induces efficient investments in some first periods, while, it induces inefficient investments in the long term.
|Date of creation:||Jan 2003|
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- Kiyotaki, Nobuhiro & Moore, John, 1997.
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 211-48, April.
- John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
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- Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
- Elyasiani, Elyas & Kopecky, Kenneth J & VanHoose, David, 1995. "Costs of Adjustment, Portfolio Separation, and the Dynamic Behavior of Bank Loans and Deposits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 955-74, November.
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