Electronic Resource
Berkeley, Calif.
:
Berkeley Electronic Press (now: De Gruyter)
Advances in macroeconomics
1.2001, 1, art2
ISSN:
1534-6013
Source:
Berkeley Electronic Press Academic Journals
Topics:
Economics
Notes:
This paper provides a new rationalization for deposit insurance and systemic disintermediations. I consider an environment in which borrowers face no penalty for failing to repay obligations except the loss of their collateral. I assume that this collateral has aggregate risk. For a subset of the exogenous parameters, I demonstrate that an optimal arrangement features deposit insurance. For a strictly smaller set of parameters, it is optimal in some states of the world to have systemic distintermediations and concomitant falls in real output.
Type of Medium:
Electronic Resource
URL:
http://www.bepress.com/bejm/advances/vol1/iss1/art2
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