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Banks, credibility and macroeconomic evolution after a production shock

Vinogradov, D (2011) 'Banks, credibility and macroeconomic evolution after a production shock.' Manchester School, 79 (3). 480 - 509. ISSN 1463-6786

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Abstract

One of the important functions of financial intermediation is intertemporal risk smoothing. In this paper we study the effects of a production shock in a closed economy and compare the abilities of market-based and bank-based financial systems in processing the shock. The analysis of the shock propagation indicates that a competitive banking system may collapse in the absence of a proper regulation. Paradoxically, it is the credibility of banks that makes bank-based economies fragile. A necessary and sufficient condition for successful bailout schemes is proposed. © 2010 The Author. The Manchester School © 2010 Blackwell Publishing Ltd and The University of Manchester.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Depositing User: Dmitri Vinogradov
Date Deposited: 03 Nov 2011 16:24
Last Modified: 30 Jan 2019 16:17
URI: http://repository.essex.ac.uk/id/eprint/1256

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