by In various banking models, banks are viewed as arrangements that insure households against uncertain liquidity needs. However, the exact nature of the liquidity risk faced by households – and hence the insurance function of banks – differs across models. This paper attempts to disentangle the different meanings of the term ‘liquidity insurance’ in the literature and to clarify what kind of insurance banks provide in which models. The paper also shows under which conditions banking is equivalent to eliminating uncertainty about liquidity needs or letting households trade with each other in an asset market. Special attention is given to the comparison of banking models in the tradition of Diamond and Dybvig (1983) with those based on monetary (notably New Monetarist)
Topics:
Swiss National Bank considers the following as important:
This could be interesting, too:
Cash - "Aktuell" | News writes Maschinenbauer Aebi Schmidt hat die Börsenreife erreicht
Cash - "Aktuell" | News writes Diesen europäischen Medtech-Aktien trauen die UBS-Analysten Potenzial zu
Cash - "Aktuell" | News writes Kanzler Scholz – Ampel wird Rente mit 63 nicht abschaffen
Cash - "Aktuell" | News writes Putin beauftragte Nawalnys Tod nicht direkt
In various banking models, banks are viewed as arrangements that insure households against uncertain liquidity needs. However, the exact nature of the liquidity risk faced by households – and hence the insurance function of banks – differs across models. This paper attempts to disentangle the different meanings of the term ‘liquidity insurance’ in the literature and to clarify what kind of insurance banks provide in which models. The paper also shows under which conditions banking is equivalent to eliminating uncertainty about liquidity needs or letting households trade with each other in an asset market. Special attention is given to the comparison of banking models in the tradition of Diamond and Dybvig (1983) with those based on monetary (notably New Monetarist) frameworks.