Financial instability, oligopolistic banking, and monetary growth
نویسنده
چکیده
This paper analyses the dynamics of a monetary economy which is characterized by increasing returns to scale in ...nancial intermediation. Due to the non–convexity, two stationary monetary equilibria may exist. The ...rst equilibrium is a saddle with high economic activity and high competition in banking. In the second equilibrium, competition between banks and economic activity are low. Under adverse economic conditions, this equilibrium can bifurcate into a sink and the economy may experience periods of ...nancial instability. However, since the resulting equilibrium will be indeterminate the predictive power of fundamental conditions is not contradictory to the random theory of ...nancial crises.
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