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| Tekijä: | Thadden, E-L. von |
| Otsikko: | The term-structure of investment and the banks' insurance function |
| Lehti: | European Economic Review
1997 : JUL, VOL. 41:7, p. 1355-1374 |
| Asiasana: | BANKS LIQUIDITY DIVERSIFICATION INVESTMENTS |
| Kieli: | eng |
| Tiivistelmä: | The article re-examines the proposition 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 the role of banks as providers of liquidity only. A model is developed with several investment opportunities in which banks have the additional function of asset diversification. This pooling of intermediation functions is shown to reduce the moral hazard problem. |
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