European Parliament Library

Bank Competition and Financial Stability :, A General Equilibrium Exposition, Marcella Lucchetta, Gianni De Nicolo

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
Table Of Contents
Cover; Contents; I. Introduction; II. Literature Review; III. The Basic Model; A. The Bank; B. Contracts, Information and Competition; Table; 1. Sequence of Events in the Basic Model; IV. Equilibrium in the basic model; V. The Extended Model; A. The Firm; B. The Bank; C. Contracts, Information and Competition; VI. Equilibriums in the Extended Model; 2. Sequence of Events in the Extended Model; VII. Conclusions; Figure; 1. Bank Risk and Welfare (Relatively Efficient Intermediation Technology); 2. Bank Risk and Welfare (Relatively Inefficient Intermediation Technology); Appendix; References
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (40 p.)
Specific Material Designation
Form Of Item

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