An overlapping generations model with a storage technology

Maeda, Yasuo

doi:10.1016/s0022-0531(05)80051-1

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2008

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“…Assumption 2(1) is a similar condition that is used to prove the existence of equilibrium in Maeda (1992). In the model with heterogeneous agents, this type of additional boundary condition is required.…”

Section: Assumptionmentioning

confidence: 99%

Microeconomic Foundation of Lender of Last Resort From the Viewpoint of Payments

Maeda

Sakai

2008

Japanese Econ Rev

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We construct a model to clarify the mechanism by which the lender of last resort (LLR) can prevent bank runs. In our model, a bank has both the function of facilitating payments in which inside money is settled using outside money and the function of financial intermediation using a deposit contract. The deposit contract might lead to a bank run, and might even contribute to an efficient allocation. Therefore, to consider the liquidity supply by the LLR, we introduce the deposit contract as a factor of instability in the banking model. We show that the LLR can assist in the recovery of both the efficiency and stability of the financial system. JEL Classification Numbers: E52, E58.

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Section: Assumptionmentioning

confidence: 99%