Excessive Financial Intermediation in a Model with Endogenous Liquidity / Maya Eden
Resource type: Ressourcentyp: Buch (Online)Book (Online)Language: English Publisher: Washington, D.C : The World Bank, 2012Description: Online-Ressource (61 p)Subject(s): Additional physical formats: Maya Eden: Excessive Financial Intermediation in a Model with Endogenous Liquidity DOI: DOI: 10.1596/1813-9450-6059Online resources: Summary: Does an unregulated financial system absorb too many productive inputs? This paper studies this question in the context of a dynamic model with heterogeneous producers. In the absence of a financial system, the only way to purchase inputs is using internal funds. Producers are subject to idiosyncratic productivity shocks, and will decide to produce only if their productivity is high enough. Otherwise, they will hold money. A financial intermediation technology allows producers to purchase inputs in excess of their internal funds, by borrowing from unproductive agents. However, intermediation requires the use of costly monitoring services. In equilibrium, intermediation increases the money in circulation and raises nominal prices, thereby reducing the value of internal funds and making producers increasingly reliant on costly monitoring services. For this reason, society is better off when intermediation is restrictedPPN: PPN: 83497438XPackage identifier: Produktsigel: ZDB-1-WBA | ZDB-110-WBLNo physical items for this record
Reproduktion, 2012. (World Bank eLibrary) |2012||||||||||