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Deutsche Bundesbank, Forschungszentrum, Frankfurt am Main >
Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank >
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http://hdl.handle.net/10419/19511
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| Title: | | Financial intermediaries, markets and growth  |
| Authors: | | Fecht, Falko Huang, Kevin Martin, Antoine |
| Issue Date: | | 2005 |
| Series/Report no.: | | Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2005,03 |
| Abstract: | | We build a model in which financial intermediaries provide insurance to households against a liquidity shock. Households can also invest directly on a financial market if they pay a cost. In equilibrium, the ability of intermediaries to share risk is constrained by the market. This can be beneficial because intermediaries invest less in the productive technology when they provide more risk-sharing. Our model predicts that bank-oriented economies should grow slower than more market-oriented economies, which is consistent with some recent empirical evidence. We show that the mix of intermediaries and market that maximizes welfare under a given level of financial development depends on economic fundamentals. We also show the optimal mix of two structurally very similar economies can be very different. |
| Subjects: | | Financial Intermediaries Risk Sharing Finance and Growth Comparing Financial Systems |
| JEL: | | E44 G20 G10 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank
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