We examine financial intermediation when banks can offer deposit or loan contracts contingent on macroeconomic shocks. We show that the risk allocation is efficient if there is no workout of banking crises. In this case, banks will shift part of the risk to depositors. In contrast, under a...

Financial intermediaries borrow in order to lend. When credit is increasing rapidly, the traditional deposit funding (core liabilities) is supplemented with other funding (non-core liabilities). We explore the hypothesis that monetary aggregates reflect the size of non-core and core liabilities...

Barnett and Block (2008) establish that not only are fractional reserve demand deposits fraudulent and create an Austrian Business Cycle (ABC), but that a certain type of mismatching between time deposits and the period for which the depository institution re-lends the deposited funds (banks or...