Financial System Architecture: The Role of Systemic Risk, Added Value and Liquidity
Jose M P Jorge
Risky investment projects make the coordination among small, uninformed investors hard to achieve, and generate inefficient low levels of investment. Several authors have pointed out the benefits to an economy from multiple avenues of financial intermediation. This paper explains endogenously different financial architectures and classifies them according to the capacity of financial intermediaries to reallocate risks and create added value. In some of these architectures, financial intermediaries improve coordination among agents by providing insurance over the primitive payoffs available in decentralized financial markets. This enhances efficiency and stabilizes the economy against fundamental shocks and confidence shifts. In other financial architectures financial intermediation plays a minor role or is unfeasible
Banking, Financial System, Systemic Risk, Global Games
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.