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Information externality, bank structure, and growthDoh, Bo-Eun 30 September 2004 (has links)
This dissertation addresses the question of whether a monopolistic banking system can lead to a higher steady state level of capital stock. Specifically, this research analyzes the comparative advantage of a monopoly banking system. By doing that, it examines factors that contribute to the promotion of economic growth that come from a concentrated banking system. There is substantial evidence of a positive relationship between financial markets development and long term output growth. Little is known, however, about the role played by the market structure of the banking sector on growth. Moreover, little work, if any, has attempted to analyze how the degree of information externality affects the relative performance of a monopoly and competitive banks. I find that a monopoly banking system might perform better in accumulating capital under both low information externality and high information externality under certain conditions. In addition, this paper shows that developing countries as well as industrial countries may benefit from a concentrated banking system. This result is not found in the existing literature, which has only shown that developing countries may benefit from a monopoly banking system. This result can be interpreted as follows: (i) for the developing countries, as the proportion of high quality firms is relatively low, the loss in output associated with lending capital to lower quality firms is relatively high. In this case, the screening technology has enough value-added to compensate for the loss in output associated with the typical rent extraction activity of the monopolist. (ii) for the industrial countries, a monopoly banking system can overcome inefficiency from free riding problem associated with the information externality. This analysis provides an alternative explanation of the recent deregulation and resulting trends in mergers and acquisitions. This supports governments' policy changes from restricting merger and acquisition activity to allowing or even promoting merger and acquisition activity.
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Information externality, bank structure, and growthDoh, Bo-Eun 30 September 2004 (has links)
This dissertation addresses the question of whether a monopolistic banking system can lead to a higher steady state level of capital stock. Specifically, this research analyzes the comparative advantage of a monopoly banking system. By doing that, it examines factors that contribute to the promotion of economic growth that come from a concentrated banking system. There is substantial evidence of a positive relationship between financial markets development and long term output growth. Little is known, however, about the role played by the market structure of the banking sector on growth. Moreover, little work, if any, has attempted to analyze how the degree of information externality affects the relative performance of a monopoly and competitive banks. I find that a monopoly banking system might perform better in accumulating capital under both low information externality and high information externality under certain conditions. In addition, this paper shows that developing countries as well as industrial countries may benefit from a concentrated banking system. This result is not found in the existing literature, which has only shown that developing countries may benefit from a monopoly banking system. This result can be interpreted as follows: (i) for the developing countries, as the proportion of high quality firms is relatively low, the loss in output associated with lending capital to lower quality firms is relatively high. In this case, the screening technology has enough value-added to compensate for the loss in output associated with the typical rent extraction activity of the monopolist. (ii) for the industrial countries, a monopoly banking system can overcome inefficiency from free riding problem associated with the information externality. This analysis provides an alternative explanation of the recent deregulation and resulting trends in mergers and acquisitions. This supports governments' policy changes from restricting merger and acquisition activity to allowing or even promoting merger and acquisition activity.
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Bayesian learning with catastrophe risk : information externalities in a large economyZantedeschi, Daniel 30 September 2011 (has links)
Based on a previous study by Amador and Weill (2009), I study the
diffusion of dispersed private information in a large economy subject to a
”catastrophe risk” state. I assume that agents learn from the actions of oth-
ers through two channels: a public channel, that represents learning from
prices, and a bi-dimensional private channel that represents learning from lo-
cal interactions via information concerning the good state and the catastrophe
probability. I show an equilibrium solution based on conditional Bayes rule,
which weakens the usual condition of ”slow learning” as presented in Amador
and Weill and first introduced by Vives (1993). I study asymptotic conver-
gence ”to the truth” deriving that ”catastrophe risk” can lead to ”non-linear”
adjustments that could in principle explain fluctuations of price aggregates.
I finally discuss robustness issues and potential applications of this work to
models of ”reaching consensus”, ”investments under uncertainty”, ”market
efficiency” and ”prediction markets”. / text
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