A general model of the banking firm under conditions of monopoly, uncertainty, and recourse

Prisman, Eliezer Z.; Slovin, Myron B.; Sushka, Marie E.

doi:10.1016/0304-3932(86)90033-4

Cited by 54 publications

(29 citation statements)

References 13 publications

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“…Optimal reserves decrease with the lending rate r L and increase with the penalty rate q. 7 For our purpose here, we extend this simple model in several directions, following in part Prisman et al (1986). Specifically, we account for required reserves, the link between the demand for cash and deposits, and output shocks.…”

Section: A Model Of Excess Liquid Assetsmentioning

confidence: 98%

The credit crunch in East Asia: what can bank excess liquid assets tell us?

Agénor

Aizenman

Hoffmaister

2004

Journal of International Money and Finance

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The paper proposes a two-step approach to assess the extent to which the fall in credit in crisis-stricken East Asian countries was a supply-or demand-induced phenomenon. The first step is based on the estimation of demand function for excess liquid assets by commercial banks. Such a function is derived analytically in the first part of the paper. The second step consists of establishing dynamic projections for the periods following the crisis and assessing whether or not residuals are large enough to be viewed as indicators of ''involuntary'' accumulation of excess reserves. Results for Thailand indicate that the contraction in bank lending that accompanied the crisis was the result of supply factors. #

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Section: A Model Of Excess Liquid Assetsmentioning

confidence: 98%

The credit crunch in East Asia: what can bank excess liquid assets tell us?

Agénor

Aizenman

Hoffmaister

2004

Journal of International Money and Finance

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“…As the proportion of funds invested in cash or cash equivalents increases, the liquidity risk of the bank declines, which may reduce the liquidity premium in bank spreads. Similarly, by introducing liquidity risk into the Monti-Klein model (in the form of some randomness in the volume of loans or deposits), Prisman, Slovin and Sushka (1986) show that the cost of the bank's resources should increase, as it includes a premium to compensate for the expected cost of a liquidity shortage (see also Freixas and Rochet, 1997).…”

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confidence: 99%

The Dynamics of Bank Spreads and Financial Structure

2014

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This paper investigates the effect of within banking sector competition and competition from financial markets on the dynamics of the transmission from monetary policy rates to retail bank interest rates in the euro area. We use a new dataset that permits analysis for disaggregated bank products. Using a difference-in-difference approach, we test whether development of financial markets and financial innovation speed up the pass through. We find that more developed markets for equity and corporate bonds result in a faster pass-through for those retail bank products directly competing with these markets. More developed markets for securitized assets and for interest rate derivatives also speed up the transmission. Further, we find relatively strong effects of competition within the banking sector across two different measures of competition. Overall, the evidence supports the idea that developed financial markets and competitive banking systems increase the effectiveness of monetary policy.

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“…This assumption follows Klein (1971), Prisman et al (1986), and others, and in particular Hannan and Berger (1991) with respect to differentiated bank products. A representative bank facing a downward-sloping demand curve in the loan market and an upward-sloping supply curve in the CD market exercises some market power in setting its loan and CD rates.…”

Section: Modelmentioning

confidence: 93%

The term structure of CD rates and monetary policy transmission

Nishiyama

2011

Journal of Banking & Finance

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A general model of the banking firm under conditions of monopoly, uncertainty, and recourse

Cited by 54 publications

References 13 publications

The credit crunch in East Asia: what can bank excess liquid assets tell us?

The credit crunch in East Asia: what can bank excess liquid assets tell us?

The Dynamics of Bank Spreads and Financial Structure

The term structure of CD rates and monetary policy transmission

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