Journal Article

Banking: A New Monetarist Approach

Chao Gu, Fabrizio Mattesini, Cyril Monnet and Randall Wright

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 80, issue 2, pages 636-662
Published in print April 2013 | ISSN: 0034-6527
Published online January 2013 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rds037
Banking: A New Monetarist Approach

More Like This

Show all results sharing these subjects:

  • Microeconomics
  • Banking
  • Money and Interest Rates
  • Macroeconomics and Monetary Economics

GO

Show Summary Details

Preview

We develop a model where: (i) banks take deposits and make investments; (ii) their liabilities facilitate third-party transactions. Other models have (i) or (ii), not both, although we argue they are intimately connected: we show that they both emerge from limited commitment. We describe an environment, characterize desirable allocations, and interpret the outcomes as banking arrangements. Banks are essential: without them, the set of feasible allocations is inferior. As a technical contribution, we characterize dynamically optimal credit allocations with frictions, show they involve backloading, and analyse how this interacts with banking. We also confront the theory with economic history.

Keywords: Banking; Limited Commitment; D02; E02; E44; G21

Journal Article.  14097 words.  Illustrated.

Subjects: Microeconomics ; Banking ; Money and Interest Rates ; Macroeconomics and Monetary Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.