A Theory of Linkage between Monetary Policy and Banking Failure in Developing Countries

Cadet, Raulin Lincifort (2006): A Theory of Linkage between Monetary Policy and Banking Failure in Developing Countries.

Abstract

This paper presents a model of the banking sector that maximize profit and an individual bank which is a price taker, in a developing country. The interest rate on treasury bills is included in the model to measure monetary policy. The mathematical expression of the probability of banking failure is calculated; And, I show that, in developing countries, a tightening monetary policy may induce efficient banking failure.

• Item Type: MPRA Paper
• Institution: Université de Rennes 1
• Language: English
• Keywords: Banking Failure; Monetary Policy; Interest Rate; Developing Countries
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

References

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