Monopolistic Pricing in the Banking Industry:
a Dynamic Model *
Enzo Diat
May 2004
Abstract
This work develops a portfolio model of the banking firm where both the size and compo-
sition of the portfolio are jointly determined. The model provides a micro-foundation of the
credit channel of transmission of monetary policy. It allows to analise the pricing policies of
the banking firm, and shows how interest rate shocks and credit quality shocks (the real shocks
that change expected default costs) affect the equilibrium level of loans and deposits. Besides
it shows the factors affecting the provision of insurance services by means of the smoothing of
shocks.
* I would like to thank Jacques Melitz, Andrew Hughes Hallett, Guido Ascari and John Ireland for many useful
comments and suggestions.
tUniversita degli studi di Milano Bicocca e University of Strathclyde. E mail: [email protected]
More intriguing information
1. WP 1 - The first part-time economy in the world. Does it work?2. The name is absent
3. Placenta ingestion by rats enhances y- and n-opioid antinociception, but suppresses A-opioid antinociception
4. The name is absent
5. The name is absent
6. Behavioural Characteristics and Financial Distress
7. Innovation Trajectories in Honduras’ Coffee Value Chain. Public and Private Influence on the Use of New Knowledge and Technology among Coffee Growers
8. The Challenge of Urban Regeneration in Deprived European Neighbourhoods - a Partnership Approach
9. The name is absent
10. Institutions, Social Norms, and Bargaining Power: An Analysis of Individual Leisure Time in Couple Households