IDEAS home Printed from https://ideas.repec.org/p/osk/wpaper/03-02.html
   My bibliography  Save this paper

Tax-Financed Public Funds Injection into Banks and its Welfare Implications

Author

Listed:
  • Ishikawa Daisuke

    (Graduate School of Economics, Osaka University)

Abstract

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.

Suggested Citation

  • Ishikawa Daisuke, 2003. "Tax-Financed Public Funds Injection into Banks and its Welfare Implications," Discussion Papers in Economics and Business 03-02, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:03-02
    as

    Download full text from publisher

    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0302.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-248, April.
    2. Hiroshi Osano & Toshiaki Tachibanaki (ed.), 2001. "Banking, Capital Markets and Corporate Governance," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28814-0.
    3. 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 955-974, November.
    4. Hiroshi Osano, 2001. "Injection of Public Funds into Banks under Deposit Insurance and Bank Regulation," Palgrave Macmillan Books, in: Hiroshi Osano & Toshiaki Tachibanaki (ed.), Banking, Capital Markets and Corporate Governance, chapter 4, pages 51-84, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Osano, Hiroshi, 2002. "Managerial compensation contract and bank bailout policy," Journal of Banking & Finance, Elsevier, vol. 26(1), pages 25-49, January.
    2. Dia, Enzo & VanHoose, David, 2017. "Banking in macroeconomic theory and policy," Journal of Macroeconomics, Elsevier, vol. 54(PB), pages 149-160.
    3. Douglas Sutherland & Peter Hoeller & Balázs Égert & Oliver Röhn, 2010. "Counter-cyclical Economic Policy," OECD Economics Department Working Papers 760, OECD Publishing.
    4. Scott, Andrew & Uhlig, Harald, 1999. "Fickle investors: An impediment to growth?," European Economic Review, Elsevier, vol. 43(7), pages 1345-1370, June.
    5. Kevin x.d. Huang & Jie Chen & Zhe Li & Jianfei Sun, 2014. "Financial Conditions and Slow Recoveries," Vanderbilt University Department of Economics Working Papers 14-00004, Vanderbilt University Department of Economics.
    6. Bindseil, Ulrich & Corsi, Marco & Sahel, Benjamin & Visser, Ad, 2017. "The Eurosystem collateral framework explained," Occasional Paper Series 189, European Central Bank.
    7. Carlos A. Arango & Oscar M. Valencia, 2015. "Macro-Prudential Policy under Moral Hazard and Financial Fragility," Borradores de Economia 878, Banco de la Republica de Colombia.
    8. Javier Bianchi & Enrique G. Mendoza, 2018. "Optimal Time-Consistent Macroprudential Policy," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 588-634.
    9. Javier Andrés & José Emilio Boscá & Javier Ferri, 2011. "Household Leverage and Fiscal Multipliers," Working Papers 1103, International Economics Institute, University of Valencia.
    10. Grintzalis, Ioannis & Lodge, David & Manu, Ana-Simona, 2017. "The implications of global and domestic credit cycles for emerging market economies: measures of finance-adjusted output gaps," Working Paper Series 2034, European Central Bank.
    11. Kenneth Kasa, 1998. "Borrowing constraints and asset market dynamics: evidence from the Pacific Basin," Economic Review, Federal Reserve Bank of San Francisco, pages 17-28.
    12. Gente, Karine & León-Ledesma, Miguel A. & Nourry, Carine, 2015. "External constraints and endogenous growth: Why didn't some countries benefit from capital flows?," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 223-249.
    13. David VanHoose, 2013. "Implications of Shifting Retail Market Shares for Loan Monitoring in a Dominant-Bank Model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(3), pages 291-316, July.
    14. Kollmann, Robert & Enders, Zeno & Müller, Gernot J., 2011. "Global banking and international business cycles," European Economic Review, Elsevier, vol. 55(3), pages 407-426, April.
    15. Raddatz, Claudio, 2006. "Liquidity needs and vulnerability to financial underdevelopment," Journal of Financial Economics, Elsevier, vol. 80(3), pages 677-722, June.
    16. Juan Pablo Medina, 2004. "Endogenous Financial Constraints: Persistence and Interest Rate Fluctuations," Working Papers Central Bank of Chile 290, Central Bank of Chile.
    17. Amable, Bruno & Chatelain, Jean-Bernard & Ralf, Kirsten, 2004. "Credit rationing, profit accumulation and economic growth," Economics Letters, Elsevier, vol. 85(3), pages 301-307, December.
    18. Crentsil Kofi Agyekum, 2017. "The effect of equity structure and influence factors on China’s banking cyclical behavior and monetary policy," China Finance and Economic Review, Springer, vol. 5(1), pages 1-19, December.
    19. Takatoshi Ito & Tokuo Iwaisako, 1996. "Explaining Asset Bubbles in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(1), pages 143-193, July.
    20. Gerth Florian & Otsu Keisuke, 2018. "The post-crisis slump in Europe: a business cycle accounting analysis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-25, January.

    More about this item

    Keywords

    Public funds injection; Stabilization of financial system; Welfare analysi;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

    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:osk:wpaper:03-02. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: The Economic Society of Osaka University (email available below). General contact details of provider: https://edirc.repec.org/data/feosujp.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.