Niveau: Supérieur, Doctorat, Bac+8
Banks, Markets, and Efficiency? Falko Fecht Deutsche Bundesbank Antoine Martin Federal Reserve Bank of Kansas City January 19, 2005 Abstract Following Diamond (1997) and Fecht (2004) we use a model in which financial market access of households restrains the efficiency of the liquidity insurance that banks' deposit contracts provide to households that are subject to idiosyncratic liquidity shocks. But in contrast to these approaches we assume spacial monopolistic competition among banks. Since monopoly rents are assumed to bring about inefficiencies, improved financial market access that limits monopoly rents also entails a positive effect. But this beneficial effect is only relevant if competition among banks does not sufficiently restrain monopoly rents already. Thus our results suggest that in the bank-dominated financial system of Germany, in which banks intensely compete for households' deposits, im- proved financial market access might reduce welfare because it only reduces risk sharing. In contrast, in the banking system of the U.S., with less com- petition for households' deposits, a high level of households' financial market participation might be beneficial. ?The views expressed here are those of the authors and not necessarily those of the Deutsche Bundesbank, the Federal Reserve Bank of Kansas City, or the Federal Reserve System. 1
- households' welfare
- banks intensely compete
- banks' deposit
- differences between
- provide households
- german financial
- financial market
- banks