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Full-Text Articles in Social and Behavioral Sciences
A Model For The Intervention Of A Financial Crisis, J. Barrow
A Model For The Intervention Of A Financial Crisis, J. Barrow
Faculty and Research Publications
This paper builds a model for intervention and/or mitigation of a financial crisis by first identifying those conditions precedent to a systemic based financial crisis, and then outlying a process to integrate firm specific and systematic risk into a comprehensive strategic model. A simple application of the model was able to identify significant outliers. For example, using 2006 to 2010 data, Capital One Financial Corporation was identified for intervention from as early as 2006. This corporation received $3.56 billion of the Emergency Economic Stabilization Act Federal bailout funds.
Banking In A Matching Model Of Money And Capital, Valerie R. Bencivenga, Gabriele Camera
Banking In A Matching Model Of Money And Capital, Valerie R. Bencivenga, Gabriele Camera
Economics Faculty Articles and Research
We introduce banks in a model of money and capital with trading frictions. Banks offer demand deposit contracts and hold primary assets to maximize depositors’ utility. If banks’ operating costs are small, banks reallocate liquidity eliminating idle balances and improving the allocation. At moderate costs, idle balances are reduced but not eliminated. At larger costs, banks are redundant. A central bank policy of paying interest on bank reserves can reverse inflation’s distortionary effects, and increase welfare, but only when costs are small. The threshold levels of banks’ costs increase with inflation, suggesting inflation and banks’ utilization are positively associated.