The term-structure of investment and the banks' insurance function

Thadden, Ernst-Ludwig von

Document Type: Working paper
Year of publication: 1996
The title of a journal, publication series: Cahiers de Recherches Économiques
Volume: 96-06
Place of publication: Lausanne
Publishing house: Département d'Econométrie et d'Economie Politique, Université de Lausanne ; HEC
Publication language: English
Institution: School of Law and Economics > Microeconomics and Finance (von Thadden (2004-)
Subject: 330 Economics
Abstract: The article re-examines the proposition, first formulated by Bryant (1980) and Diamond and Dybcvig ( 1983), that in a production economy with stochastic liquidity shocks to the household sector, banks serve to provide optimal intertemporal insurance to consumers. The paper argues that in order to understand the moral hazard problems inherent in this insurance problem, it is too narrow to consider solely the role of banks as providers of liquidity. The paper develops a model with several investment opportunities in which banks have the additional function of asset diversification.

Dieser Datensatz wurde nicht während einer Tätigkeit an der Universität Mannheim veröffentlicht, dies ist eine Externe Publikation.

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