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This paper formally identifies an important role of banks: Banks competitively internalize production externalities and facilitate economic growth. I formulate a canonical growth model with externalities as a game among consumers, firms, and banks. Banks compete for deposits to seek monopoly profits, including externalities. Using loan contracts that specify price and quantity, banks control firms' investments. Each bank forms a firm group endogenously and internalizes externalities directly within a firm group and indirectly across firm groups. This unique equilibrium requires a condition that separates competition for sources and uses of funds. I present a realistic institution that satisfies this condition.

Banks and banking -- Econometric models. --- Economic development -- Econometric models. --- Electronic books. -- local. --- Business & Economics --- Economic Theory --- Economic development --- Banks and banking --- Econometric models. --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Finance --- Financial institutions --- Money --- Banks and Banking --- Finance: General --- Industries: Financial Services --- Noncooperative Games --- Exchange and Production Economies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- One, Two, and Multisector Growth Models --- General Financial Markets: General (includes Measurement and Data) --- Interest Rates: Determination, Term Structure, and Effects --- Loans --- Interbank markets --- Deposit rates --- Bank deposits --- Financial markets --- Financial services --- Competition --- International finance --- Interest rates --- United States

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We study models that display growth with financial deepening and increasing inequality along the way to perpetual steady state growth. A benchmark model is essentially a complete markets model but with transaction costs of financial intermediation. New proofs are required and thus provided for stochastic dynamic programming for the case of unbounded return functions and perpetual growth with a non-convex transaction technology. We calibrate the model and report quantitative predictions for Thailand during 1976-96. We find a discrepancy between the model and the data, suspect barriers to financial deepening as a cause, and evaluate the associated welfare loss.

Banks and Banking --- Macroeconomics --- Demography --- Industries: Financial Services --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- One, Two, and Multisector Growth Models --- Aggregate Factor Income Distribution --- Demographic Economics: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Financial Institutions and Services: General --- Banking --- Population & demography --- Income distribution --- Income inequality --- Population and demographics --- Consumption --- National accounts --- Financial sector --- Economic sectors --- Banks and banking --- Population --- Economics --- Financial services industry --- Thailand

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Traditionally, the impacts of the rights of financial institutions and workers on corporate performance have been analyzed independently. Yet, theory clearly indicates that the combination of relative powers of different stakeholders affects a firm overall performance. Using U.S. state level and state-industry level data, we investigate how output growth is affected by bank branch deregulation and employment protection occurring over 1972-1993. We find that financial liberalization positively impact overall state growth but greater workers' rights affects it ambiguously. At the industry level, however, employment protection promotes those industries that are more knowledge intensive, while the effect of financial liberalization does not differ across industries that vary in external financing dependency. The results hold controlling for changes in shareholders' rights, which itself is not significant. The findings suggest that financial liberalization operates mostly through an efficiency channel, better reallocating resources across sectors, while employment protection creates higher incentives and encourages more sector-specific, human capital investments. Overall, the results show that the strength of stakeholders' protection affects performance through efficiency channels and provide support for a stakeholders' view of corporate governance.

Banks and banking --- Working class --- Corporate governance --- Industrial productivity --- State supervision --- Banks and Banking --- Labor --- Macroeconomics --- Labor Contracts --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Wages, Compensation, and Labor Costs: Public Policy --- Labor Economics: General --- Macroeconomics: Production --- Labour --- income economics --- Banking --- Employment protection --- Minimum wages --- Production growth --- Manpower policy --- Minimum wage --- Labor economics --- Production --- Economic theory --- United States --- Income economics

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Based on a simple framework, this note clarifies the economics behind bank restructuring and evaluates various restructuring options for systemically important banks. The note assumes that the government aims to reduce the probability of a bank’s default and keep the burden on taxpayers at a minimum. The note also acknowledges that the design of any restructuring needs to take into consideration the payoffs and incentives for the various key stakeholders (i.e., shareholders, debt holders, and government).

Banks and Banking --- Finance: General --- Financial Risk Management --- Investments: Stocks --- Investments: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- International Financial Markets --- General Financial Markets: Government Policy and Regulation --- General Financial Markets: General (includes Measurement and Data) --- Banking --- Investment & securities --- Finance --- Stocks --- Asset valuation --- Asset management --- Distressed assets --- Financial institutions --- Asset and liability management --- Financial sector policy and analysis --- Securities --- Banks and banking --- Asset-liability management --- Financial instruments --- United States

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We consider the optimality of various institutional arrangements for agencies that conduct macro-prudential regulation and monetary policy. When a central bank is in charge of price and financial stability, a new time inconsistency problem may arise. Ex-ante, the central bank chooses the socially optimal level of inflation. Ex-post, however, the central bank chooses inflation above the social optimum to reduce the real value of private debt. This inefficient outcome arises when macro-prudential policies cannot be adjusted as frequently as monetary. Importantly, this result arises even when the central bank is politically independent. We then consider the role of political pressures in the spirit of Barro and Gordon (1983). We show that if either the macro-prudential regulator or the central bank (or both) are not politically independent, separation of price and financial stability objectives does not deliver the social optimum.

Banks and banking, Central. --- Banks and banking. --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Banker's banks --- Banks, Central --- Central banking --- Central banks --- Finance --- Financial institutions --- Money --- Banks and banking --- Banks and Banking --- Finance: General --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Optimization Techniques --- Programming Models --- Dynamic Analysis --- Macroeconomics: Consumption --- Saving --- Wealth --- Contingent Pricing --- Futures Pricing --- option pricing --- Price Level --- Deflation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: Government Policy and Regulation --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary economics --- Price stabilization --- Financial sector stability --- Credit --- Prices --- Government policy --- Financial services industry --- Option pricing