Working Paper No. 15-19 Private Money and Banking Regulation

نویسندگان

  • Cyril Monnet
  • Daniel R. Sanches
  • Guillaume Rocheteau
  • Mitchell Berlin
  • Shouyong Shi
  • Costas Azariadis
چکیده

We show that a competitive banking system is inconsistent with an optimum quantity of private money. Because bankers cannot commit to their promises and the composition of their assets is not publicly observable, a positive franchise value is required to induce the full convertibility of bank liabilities. Under perfect competition, a positive franchise value can be obtained only if the return on bank liabilities is su¢ ciently low, which imposes a cost on those who hold these liabilities for transaction purposes. If the banking system is monopolistic, then an e¢ cient allocation is incentive-feasible. In this case, the members of the banking system obtain a higher return on assets, making it feasible to pay a su¢ ciently high return on bank liabilities. Finally, we argue that the regulation of the banking system is required to obtain e¢ ciency. Keywords: Private money, banking structure, regulation JEL classi…cation: E42, G21, G28

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تاریخ انتشار 2015