Optimal Liquidity Provision and Dynamic Incentive Compatibility

The paper analyses the problem of optimal liquidity provision in simple continuous-time general-equilibrium model under uncertainty. It argues that liquidity provision is subject to moral-hazard problems due to the unobservebility of households' characteristics and characterizes incentive-compatible deposit contracts as second mechanisms to provide liquidity.

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Year of publication:	1996-02
Authors:	THADDEN, Ernst-Ludwig VON
Institutions:	Départment d'économétrie et d'économie politique (DEEP), Faculté des Hautes Études Commerciales (HEC)
Subject:	liquidity \| deposit contracts \| banking \| dynamic programming

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Series:	Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP).
Type of publication:	Book / Working Paper
Notes:	Published in Journal of Financial Intermediation, vol. 7 (2), April 1998, pp. 177-197 29 pages
Classification:	D51 - Exchange and Production Economies ; D92 - Intertemporal Firm Choice and Growth, Investment, or Financing ; G20 - Financial Institutions and Services. General ; G21 - Banks; Other Depository Institutions; Mortgages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005481704