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【Macro/Finance webinar】Interest Rates, Market Power, and Financial Stability


  • 研討會日期 : 2021-06-18
  • 時間 : 16:00
  • 主講人 : Professor Rafael Repullo
  • 地點 : online
  • 演講者簡介 : Professor Repullo received his Ph.D. in Economics from London School of Economics in 1984. He is currently a Professor of Economics and Director of Economics at Centro de Estudios Monetarios y Financieros (CEMFI). His research interests are Banking theory and regulation, Corporate finance, and Monetary economics.
  • 演講摘要 : This paper shows the relevance of market power to assess the effects of interest rates on financial intermediaries’ risk-taking decisions. We consider an economy where (i) intermediaries have market power in granting loans, (ii) intermediaries monitor borrowers which lowers their probability of default, and (iii) monitoring is costly and unobservable which creates a moral hazard problem with uninsured depositors. We show that lower safe rates lead to lower intermediation margins and higher risk-taking when intermediaries have low market power, but the result reverses for high market power. We examine the robustness of this result to introducing non-monitored market finance, heterogeneity in monitoring costs, and entry and exit of intermediaries. We also consider the effect of deposit insurance, market power in raising deposits, and funding with both deposits and capital.