Abstract not found

Acomplexfinancial system comprises both financial markets and financial intermediaries. We distinguish financial intermediaries according to whether they issue complete contingent contracts or incomplete contracts. Intermediaries such as banks that issue incomplete contracts, e.g., demand deposits

We propose a dynamic theory of financial intermediaries as collateralization specialists that are better able to collateralize claims than households. Intermediaries require capital as they can borrow against their loans only to the extent that households themselves can collateralize the assets

In this paper we investigate financial intermediaries, such as banks, life insurance companies and pension funds that are governed by their depositors. Using a simple OLG Diamond Dybvig model we find that the risk sharing capacity of such institutions is severaly limited due to the temptation

We reconsider the role of nancial intermediaries in monetary economics. We explore the hypothesis that the nancial intermediary sector is the engine that drives the nancial cycle through the uctuations in the price of risk. In this framework, balance sheet quantities emerge as a key indicator

as to avoid rebalancing transactions. In equilibrium, these intermediaries pay redemptions with portfolio income and never sell secondary assets. We also find that the pure exchange economy has a downward sloping yield curve and is inherently cyclical.

York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors. Financial Intermediation, Asset Prices, and Macroeconomic Dynamics

Kevin Huang is a senior economist and Antoine Martin is an economist at the Federal Reserve Bank of Kansas City. The authors wish to thank Jerry Hanweck, Frederick Joutz, Todd Keister,

Banks perform valuable activities on either side of their balance sheets. On the asset side, they make loans to difficult, illiquid borrow-ers. On the liability side, they provide liquid-ity on demand to depositors. But there seems to be a fundamental incompatibility between the two activities: the demands for liquidity by depositors may arrive at an inconvenient time and force the fire-sale liquidation of il-liquid assets. Furthermore, because depositors are served in sequence, the prospect of fire sales may precipitate self-fulfilling runs that further jeopardize bank activities. Is this an aberration, stemming from historical acci-dent, and enshrined by deposit insurance? Or

This paper studies the propagation of shocks via financial intermediaries over the business cycle. The leverage of financial intermediaries is shown to be an important determinant of credit conditions. Importantly, in this model the relevance of financial intermediation does not stem from legal