Bank Competition and Financial Stability: A General Equilibrium Exposition

We study versions of a general equilibrium banking model with moral hazard under either constant or increasing returns to scale of the intermediation technology used by banks to screen and/or monitor borrowers. If the intermediation technology exhibits increasing returns to scale, or it is relativel...

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Bibliographic Details
Main Author: Lucchetta, Marcella (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 2011
Series:IMF Working Papers Working Paper No. 11/295
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Summary:We study versions of a general equilibrium banking model with moral hazard under either constant or increasing returns to scale of the intermediation technology used by banks to screen and/or monitor borrowers. If the intermediation technology exhibits increasing returns to scale, or it is relatively efficient, then perfect competition is optimal and supports the lowest feasible level of bank risk. Conversely, if the intermediation technology exhibits constant returns to scale, or is relatively inefficient, then imperfect competition and intermediate levels of bank risks are optimal. These results are empirically relevant and carry significant implications for financial policy
Physical Description:1 Online-Ressource (39 p)
ISBN:1463927290
9781463927295

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