Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159238
Authors: 
Chiesa, Gabriella
Year of Publication: 
2001
Series/Report no.: 
Quaderni - Working Paper DSE 397
Abstract: 
This paper studies moral hazard in banking due to delegated monitoring in an environment of aggregate risk and examines its implications for credit market equilibrium and regulation, in a model where banks are price competitors for loans and deposits. It provides a rationale for an incentive-based lending capacity positively linked to the bank's capital and profit margin, for an oligopolistic market structure wherever banks have market power, and for capital requirements. Social-welfare-maximizing capital requirements are lowered in recessions, are higher the more fragmented the banking sector, and are increased when anti-competitive measures are removed. In equilibrium banks earn excessive profits and credit may be rationed.
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

Files in This Item:
File
Size
375.91 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.