the demand for energy cross country evidence using the florida model abstract income and own price elasticities of demand for energy for 51 countries in 1980 are presented based on pooled estimates from an 11 good demand system estimated with the florida model results indicate income elasticities of demand for energy are significantly larger than unitary for all countries and own price elasticities of demand for energy range between 0 8 and 1 0

banking panics information and rational expectations equilibrium this paper shows that bank runs can be modeled as an equilibrium phenomenon we demonstrate that some aspects of the intuitive story that bank runs start with fears of insolvency of banks can be rigorously modeled if individuals observe long lines at the bank they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run however bank runs occur even when no one has any adverse information extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations banking panics were a recurrent phenomenon in the united states until the 1930s they have re emerged as a source of public concern and much theoretical research recently in this paper we provide an information theoretic rationale for bank runs the traditional story is that contagion is an important aspect of bank runs the idea seems to be that when the general public observes large withdrawals from the banking system fears of insolvency grow resulting in even larger withdrawals of deposits in our model some individuals withdraw because they get information that future returns are likely to be low uninformed individuals observing this also have an incentive to liquidate their investments in addition some individuals need to withdraw deposits for other than informationally based reasons thus if the random realization of such a group of individuals is unusually large then the uninformed individuals will be misled and will precipitate a run on the bank the technology is such that a large volume of withdrawals involves liquidation costs consequently runs on the bank do impose social costs a mechanism that may reduce these costs in our model is to suspend convertibility if withdrawals are high however those individuals who need to withdraw their assets for liquidity reasons are worse off ex post our model provides a rationalization for restrictions in demand deposits that were widespread prior to 1929 friedman and schwartz 7 suggest that restrictions of payments ensured

the demand for energy evidence from a cross country demand system abstract some new evidence on the income own price elasticities of demand for energy consumption by consumers is presented estimates are derived from a complete system of cross country demand equations with energy being one of the commodities considered

bank liquidity and stability in an overlapping generations model in an infinitely repeated version of the diamond and dybvig 1983 model intergenerational transfers enable a bank to achieve interest rate smoothing and to provide depositors with liquidity insurance without diamond and dybvig s assumption of no side trades the bank is subject to runs that may result from either excessive withdrawals or the lack of new deposits the latter cause which cannot occur in diamond and dybvig s one generation model implies that suspension of convertibility may not prevent bank runs government intervention may be necessary to maintain bank stability article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

deposit insurance reform what are the issues and what needs to be fixed abstract the current problems in the commercial banking industry have led to widespread calls for reform of the deposit insurance contract on the grounds that it promotes moral hazard we review the empirical evidence for the significance of moral hazard as an important cause of the present crisis we then evaluate various reform proposals grouped into two broad classes proposals that seek to impose greater discipline on bank stockholders and proposals to increase the disciplinary role of bank debtholders finally we identify some issues that have received inadequate attention in the literature on bank regulation

risk shifting incentives of depository institutions a new perspective on federal deposit insurance reform abstract we characterize the risk shifting incentives of a depository institution as arising fundamentally from the existence of limited liability and the associated convex payoff to equity holders this risk incentive feature is unchanged by deposits being insured and hence excessive risk taking by depository institutions is not solely attributable to the flat rate insurance premium consequently the incentive problem cannot be resolved through a risk based insurance premium contrary to the prevailing view we propose a solution that eliminates risk shifting through an optimal tax structure and specify a corresponding insurance premium that is revenue neutral from the social planner s regulator s standpoint the solution is derived in the context of a social objective function that trades off the benefits of liquidity services by banks and the unique informational role of bank loans with the costs of investment distortions engendered by risk shifting

unique equilibrium in a model of self fulfilling currency attacks even though self fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals this unique equilibrium depends not only on the fundamentals but also on financial variables such as the quantity of hot money in circulation and the costs of speculative trading in contrast to multiple equilibrium models our model allows analysis of policy proposals directed at curtailing currency attacks

do capital adequacy requirements reduce risks in banking abstract in a dynamic framework it is shown that capital adequacy rules may increase a bank s riskiness in addition to the standard negative effect of rents on risk attitudes of banks a further intertemporal effect has to be considered the intuition behind the result is that under binding capital requirements an additional unit of equity tomorrow is more valuable to a bank if raising equity is excessively costly the only possibility to increase equity tomorrow is to increase risk today

distinguishing panics and information based bank runs welfare and policy implications in this paper we contrast panics and information based bank runs in an effort to provide a robust and empirically plausible model of how bank runs are triggered the model of information based runs is characterized by two sided asymmetric information the bank cannot observe the true liquidity needs of the depositors while depositors are asymmetrically informed about bank asset quality we also examine the relative degrees of risk sharing provided by bank deposit contracts and traded equity contracts we show that the choice of deposit or equity depends on the attributes of and information about the underlying investment returns

income and price elasticities of demand at low levels of real income abstract for levels of real per capita income starting at 3 of the u s per capita income in 1975 income and price elasticities of demand are tabulated the prominent role of food consumption for low income households is emphasized

bank runs as an equilibrium phenomenon a standard demand deposit contract in which individuals are entitled to their full deposit at any time provided the bank is solvent is analyzed in a context in which there are no exogenous events on which agents condition their behavior and a unique equilibrium involving a bank run with positive probability is shown to exist

the term structure of investment and the banks insurance function abstract the article re examines the proposition first formulated rigorously by bryant a model of reserves bank runs and deposit insurance journal of banking and finance 4 335 344 1980 and diamond and dybvig bank runs deposit insurance and liquidity journal of political economy 91 401 419 1983 that in a production economy with stochastic liquidity shocks to the household sector banks serve to provide optimal intertemporal insurance to consumers the paper argues that in order to understand the moral hazard problems inherent in this insurance problem it is too narrow to consider solely the role of banks as providers of liquidity the paper develops a model with several investment opportunities in which banks have the additional function of asset diversification this pooling of intermediation functions is shown to reduce the moral hazard problem thereby enhancing the stability of depository contracts and increasing the scope of the banks insurance function

the effect of capital structure on a firm s liquidation decision abstract a firm s liquidation can impose costs on its customers workers and suppliers an agency relationship between these individuals and the firm exists in that the liquidation decision controlled by the firm as the agent affects other individuals the customers workers and suppliers as principals the analysis in this paper suggests that capital structure can control the incentive conflict problem of this relationship by serving as a pre positioning or bonding mechanism appropriate selection of capital structure assures that incentives are aligned so that the firm implements the ex ante value maximizing liquidation policy

a cross country tabulation of own price elasticities of demand abstract this paper tabulates frisch slutsky and cournot own price elasticities for each of 10 goods at the per capita real income levels of 30 countries ranging from india to the united states

variable rate deposit insurance a re examination abstract this paper investigates the impact of variable rate deposit insurance on the financial and real sectors of the economy and its role as an absorber of bankruptcy risk within these sectors a variable rate system raises the cost of funds to the real sector and increases probability of bankruptcy of the borrowing firms when such bankruptcies occur society experiences a dead weight loss we argue that appropriate deposit insurance pricing must weigh the social costs connected with both financial firm failure and real sector bankruptcy

bank run psychology abstract banks are inherently susceptible to panics and bank runs due to the problem of maturity mismatch resulting in both a stable equilibrium in which the bank survives and an unstable equilibrium in which a bank run occurs understanding equilibrium selection in this setting is extremely important for safeguarding financial stability in this paper one new potential factor that determines whether a bank runs gets triggered or not is experimentally studied namely the psychological state of the depositor prior to participating in an experimental bank run game subjects are either induced with fear sadness or happiness using an autobiographical emotion induction task the findings suggest that the presence of background fear significantly increases the likelihood of withdrawal and a subsequent bank run in addition women are shown to be significantly more likely to withdraw then men but only in the fear induction treatment

risk in banking and capital regulation this paper investigates the role of bank capital regulation in risk control it is known that banks choose portfolios of higher risk because of inefficiently priced deposit insurance bank capital regulation is a way to redress this bias toward risk utilizing the mean variance model the following results are shown a the use of simple capital ratios in regulation is an ineffective means to bound the insolvency risk of banks b as a solution to problems of the capital ratio regulation the theoretically correct risk weights under the risk based capital plan are explicitly derived and c the theoretically correct risk weights are restrictions on asset composition which alters the optimal portfolio choice of banking firms the recent increase in bank failures especially after the 1980 and 1982 deregulatory acts has again ignited a controversy over the risk portfolio of the banking industry given the importance of this sector there has been increased scrutiny of the industry s motives for risk taking and possible regulatory changes to improve its stability these investigations have centered around two rather complementary areas the first of these is the role of deposit insurance and how its current pricing procedure encourages risk taking and justifies current bank regulations the works of buser chen and kane 4 kane 9 and benston et al 2 have made substantive contributions the authors demonstrates the way in which our current fixed rate insurance system rewards risk taking by the firm and insulates it through deposit insurance from the market discipline that needs to exist to ensure proper risk evaluation this realization has led these authors to propose a series of regulatory changes to encourage proper portfolio choice within the industry these include a shift to market value accounting risk based deposit insurance premiums and additional capital regulation the last of these serves as a method of coinsurance whereby higher capital levels require the bank to absorb greater losses in the event of failure and encourage additional prudence in management in essense it is one method of risk reduction that may offset the risk preference imposed on the industry due to the inappropriate insurance pricing because the amount of capital influences the probability of bank insolvency and thus the soundness of the entire banking system the regulators ceteris paribus prefer more capital to

bank runs the deposit currency ratio and the interest rate abstract this paper provides a model of an economy with a banking system which is subject to bank runs the model is then used to explain the rise in short term interest rates during bank runs and the fall in the deposit currency ratio in anticipation of possible runs

financial intermediaries and liquidity creation trading losses associated with information asymmetries can be mitigated by designing securities which split the cash flows of underlying assets these securities which can arise endogenously have values that do not depend on the information known only to informed agents bank debt deposits is an example of this type of liquid security which protect relatively uninformed agents and we provide a rationale for deposit insurance in this content high grade corporate debt and government bonds are other examples implying that a money market mutual fund based payments system may be an alternative to one based on insured bank deposits

federal deposit insurance regulatory policy and optimal bank capital this paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the fdic essentially the fdic sells two products insurance and regulation to span the product space it must and does set two prices we argue that the need to establish regulatory disincentives to bank risk taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value i e the value of their right to continue in business stands at the center of these disincentives and in front of the fdic s insurance reserves just as a book shouldn t be judged by its cover a government agency shouldn t be judged by the words behind its initials with the fdic federal deposit insurance corporation the agency s name describes only part of its formal operations the fdic is quasi governmental has a regional structure and sells deposit insurance however the initials fail to convey the fdic s critical place in the governmental regulatory structure as the sole federal overseer of the approximately 8900 state chartered commercial banks that have chosen not to belong the federal reserve system reflecting the federal reserve s membership problem the number of these banks is growing year by year besides selling deposit insurance at bargain explicit rates the fdic performs four regulatory functions 1 entry regulation it passes on new banks applications for deposit insurance and on branch and merger proposals as well thereby protecting the value of existing bank charters 2 examination two thirds of fdic employees are concerned with inspecting bank records and supervising managerial activity 3 regulation of deposit rates and conditions for withdrawal by tradition fdic policies on these matters conform entirely with regulations applicable to federal reserve member banks and 4 disposition of failed banks when an insured bank fails the fdic usually chooses not to liquidate it 2

fixed versus variable rate loans this paper discusses the nature of fixed and variable loan contracts and derives the conditions which determine the optimal quantity of each the results indicate that the payoff functions are quite different and dependent upon the project financed the appropriate conditions for the allocation of loan terms to a set of borrowers are then developed finally the analysis derives the optimal portfolio frontier and risk return trade off for the banking firm here it is demonstrated that the solution is unlikely to be at a point of zero interest rate risk

banks versus markets a response to kucinskas abstract this is a response to kucinskas 2016 who comments on my article zimper 2013

deposit competition and financial fragility evidence from the us banking sector preliminary and incomplete please do not cite without permission we develop and estimate an empirical model of the u s banking sector using a new data set covering the largest u s banks over the period 2002 2013 our model incorporates insured depositors and run prone uninsured depositors who have rich preferences over dierentiated banks banks compete for deposits in the spirit of matutes and vives 1996 and can endogenously default we estimate demand for uninsured

bank runs and currency run in a system without a safety net argentina and the tequila shock abstract this paper tests the random withdrawals vs informed based theories of bank runs in the context of the bank panic that took place in argentina as a consequence of the mexican devaluation of december 20 1994 this evidence is unique in several ways it is the case of a contemporary banking system with virtually no explicit safety net a currency board with no deposit insurance scheme and a case in which the bank runs were triggered by a currency run the findings of the paper provide support to the informed based theories and show that depositors are concerned with the impact of a currency run on bank solvency

modeling the banking firm a survey this paper reports on the status of the literature on micro bank modeling and assesses our understanding of the banking firm s optimal behavior this is no mean task for much has been written on banking broadly defined over the past couple of decades the review is developed in pieces each major subproblem is outlined and the analysis used to deal with the issue explicated this is not the best way to summarize the development of a field it should be immediately recognized one would prefer to have a smooth continuum of development moving the frontier of knowledge evenly through time and across subareas yet this is rarely the way a field develops more likely individual questions attract attention and are the subjects of a substantial number of contributions after a time the field moves on to the new area of interest the banking field is no exception before embarking upon the review however a couple of lines should be devoted to previous attempts there have been essentially three first pyle 1972 analyzes the uncertainty portfolio models at a time when little existed in the literature and hence one finds the review a bit vague and sketchy baltensperger s contributions 1978 1980 are the next serious and rather extensive reviews the quality of these

information liquidity and asset trading in a random matching game abstract this paper develops a sequential random matching model of asset trading to analyze how the extent of information about an asset that is available in the market can affect its tradeability liquidity traders are rational agents with higher impatience which make optimal intertemporal consumption decisions given the trading constraints information asymmetries result in unexecuted trades agents who want to consume relatively early optimally choose to exchange initial assets for new assets that have lower expected payoff but are more liquid in subsequent trading these assets have a lower expected rate or return i e a liquidity premium and higher trading volume journal of economic literature classification numbers d83 g11 g14

a framework for assessing credit risk in depository institutions toward regulatory reform abstract this paper develops and illustrates a new method for evaluating the credit risk borne by depository institutions that may prove to be an important element in a regulatory mechanism sensitive to risk in our framework depository institutions are forced to bear the costs of their risk exposure and hence to internalize this cost when extending loans using various loan portfolios and alternative macroeconomic scenarios we present numerical calculations demonstrating the ability of our framework to capture variations in risk exposure and highlighting the significance of portfolio concentrations these calculations are based on an important new source of information that permits an econometric analysis of loan losses by industry

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

is fairly priced deposit insurance possible we analyze risk sensitive incentive compatible deposit insurance in the presence of private information and moral hazard without deposit linked subsidies it is impossible to implement risk sensitive incentive compatible deposit insurance pricing in a competitive deregulated environment except when the deposit insurer is the least risk averse agent in the economy we establish this formally in the context of an insurance scheme in which privately informed depository institutions are offered deposit insurance premia contingent on reported capital the result holds for alternative sorting instruments as well this suggests a contradiction between deregulation and fairly priced risk sensitive deposit insurance this paper exposes a conflict between a deregulated competitive financial services industry on the one hand and fairly priced risk sensitive deposit insurance on the other we show that if depository institutions dis are perfectly competitive i e each makes zero profits on average then it is impossible to implement incentive compatible risk sensitive deposit insurance pricing recent distress among dis has fueled debate about reform of the existing deposit insurance system many believe that the prevailing risk insensitive premium structure encourages dis to choose excessively risky assets and that it should be replaced by deposit insurance premia linked to the dis choices of risk 2 risk sensitive deposit insurance pricing however imposes greater informational demands on the deposit insurer and runs afoul of both

frich s conjecture and the own price elasticity of the demand for food abstract frich s 1959 conjecture on the behavior of the income elasticity of the marginal utility of income is tested by means of cross country data particularly in relation to the behavior of the frisch own price elasticity of the demand for food

is there curvature in the slutsky matrix d o the poor substitute among commodities more flexibly than the rich when relative prices change even when compensated for the income effects of the price changes is it necessary to add a third dimension to the slutsky substitution matrix to identify household income in short do the terms of the slutsky elasticity matrix curve smoothly from poor households to rich households in such a way that equation 1 is meaningful

deposit insurance pricing and social welfare abstract recent literature has established that financial disruption has real costs which justify government intervention in the financial sector one form of government intervention is deposit insurance in this paper we determine the optimal pricing and subsidy of deposit insurance in a social welfare context the main conclusion is that optimal deposit insurance need not be actuarially fair in an economy with a real and a financial sector we consider the effects of taxation and social political weights of the sectors we analyze two policy tools government supervision and deposit insurance pricing

optimal pricing of local telephone service although payment for nearly all other goods and services including toll long distance telephone calls increases with greater consumption nearly 90 percent of the residential telephone subscribers and more than half the business subscribers in the united states now pay a flat monthly rate for local calls see larry garfinkel recently however the telephone companies and regulatory commissions have been moving cautiously toward imposing usage charges for local telephone calls there is renewed interest in what is currently termed usage sensitive pricing t usp it is due to the combined forces of inflation increased local usage and competition from independent firms that sell telephone terminal equipment and supply private toll lines to business customers under usp the pricing of such services as telephone installation directory assistance and minutes of calling is based on incremental rather than average costs since world war ii technological advances have benefited long distance far more than local telephone calling development in microwave communications coaxial cable satellites and waveguides have dramatically lowered the costs of long distance transmission in contrast the costs of local service have moved upward since the late 1960 s at a rate not far below the general price index see at t 1975 faced with a continuing stream of requests for local telephone rate increases state regulatory commissions are finding the concept of tying prices to usage increasingly attractive at t and some of the independent telephone carriers are beginning to test usp plans in several cities with flat rate tariffs increases in local calling add to carrier costs but not to their revenues the local calling rate per subscriber has increased by an average of 2 percent for the past seven years at t s chairman has stated we are moving more and more in the direction of usage sensitive pricing see washington star news p a12 and according to newspaper accounts of at t management documents the bell system plans to phase out flat rate telephone service and begin charging for each local call in major metropolitan areas in 1978 80 see seattle postintelligencer pp 1 10 still regulatory commissions consumer groups and the carriers themselves remain cautious about requiring usage sensitive tariffs for all subscribers the prospective gains from prices more closely related to costs are at least partially offset by the added costs of metering equipment and billing most telephone subscribers prefer flat rates according to bell system marketing surveys see garfinkel p 28 and it is by no means clear which groups of subscribers will be helped and which harmed by such revisions in local tariff structures will the poor end up paying more because they use their phones more should different prices be charged for calls at different times of day on what bases should the monthly and per call rates be determined the purpose of this paper is to sort out some of the questions of economic efficiency and equity that arise when changes are considered in the methods of pricing local telephone services in section i i construct a department of economics the rand corporation and the international institute of management berlin this study was supported under a grant from the john and mary r markle foundation i am indebted to walter s baer for numerous contributions to this paper to s c littlechild and patricia munch and to the managing editor and a referee of this review for critical and constructive review of a draft i have benefited as well from the comments and suggestions of james h alleman stanley m besen william s comanor john m drew leland l johnson john a kay edward d lowry carl pavarini john rolph ralph turvey and chris witze bryant mori assisted with the computer programming see my 1976 paper for a more extensive version of this paper which also discusses optimal flat rate and optimal peak load tariffs

banking and insurance abstract this paper studies the economic role of financial institutions in economies where agents incomes are subject to privately observable idiosyncratic random events the information structure precludes conventional insurance arrangements however a financial institution perhaps best viewed as a savings bank can provide partial insurance by generating a time pattern of deposit returns that redistributes wealth from agents with high incomes to those with low incomes resulting in a level of expected utility higher than that achievable in simple security markets insurance is incomplete because the bank faces a tradeoff between provision of insurance and maintenance of private incentives

two views of applied welfare analysis the case of local telephone service pricing there are two standards that an economist may use to determine optimal prices the first is arnold harberger s 3 utilitarian standard which says that prices should be chosen to maximize the algebraic sum of consumer s and producer s surpluses the second is the competitive standard which regards any voluntary exchange as welfare improving and therefore seeks prices that maximize such exchanges the purpose of this essay is to briefly discuss these alternative theories of economic welfare point out how they may conflict and illustrate such a conflict in the pricing of local telephone service

the measurement of income and price dispersion in cross country demand analysis abstract measures are formulated for the dispersion of real income and relative prices across countries they are applied to 30 countries in 1975 for 10 groups of consumer goods

income elasticities at different price vectors abstract cross country data are used to evaluate the income elasticities of the demand for ten broad groups of goods at two different price vectors the observed prices of separate countries and the geometric means of these prices across all countries the major effect is on the income elasticity of the demand for food using observed rather than geometric mean prices results in lower elasticity values for the more affluent countries

on the international harmonization of bank regulation this paper offers a three way typology of bank regulation and examines the question of international harmonization for each category for economic regulation the danger is that harmonization could support and preserve domestic protectionist regulatory regimes but it could instead be a beneficial guise for lowering protectionist barriers the latter efforts should be encouraged for prudential regulation national regulation should be adequate to handle the extra stresses of international banking harmonization efforts e g the basle accord may offer only modest help but the accord may offer indirect help by limiting national governments competitive efforts implicitly to subsidize their banks risk taking activities finally for information regulation national regulation appears to be adequate and international harmonization does not appear to be necessary copyright 1994 by oxford university press

estimation of complete demand systems from household budget data the linear and quadratic expenditure systems in this paper we explore two issues in empirical demand analysis the estimation of complete systems of demand equations using household budget data section i and the incorporation of demographic characteristics into such systems section ii although there are numerous studies which use time series data to estimate complete demand systems and many which estimate engel curves from household budget data there are virtually none which combine budget data from different periods to estimate complete systems since each budget study corresponds to a single price situation one might conjecture that estimation of complete systems would not be possible unless budget studies were available from a large number of periods this is incorrect in section i we argue that interesting complete demand systems can be estimated from a small number of budget studies despite the limited price variability represented in such data to demonstrate this we use budget study data for two periods to estimate a pair of related demand systems the familiar linear expenditure system les and a quadratic expenditure system qes a generalization of les in which the demand equations are quadratic in total expenditure the inclusion of demographic variables in the analysis of household consumption patterns is desirable because there are likely to be systematic differences in the consumption behavior of households with different demographic characteristics but the effects of demographic characteristics have seldom been studied within the framework of complete demand systems in section ii we propose translating as a general method for incorporating demographic variables into complete systems of demand equations this method has not previously been discussed as a general technique for bringing demographic variables into demand systems although it has been employed in several studies to improve the estimates of the les and the qes presented in section i we reestimate these two systems using translating to incorporate family size

bailouts and financial fragility how does the belief that policymakers will bail out investors in the event of a crisis affect the allocation of resources and the stability of the financial system i study this question in a model of financial intermediation with limited commitment when a crisis occurs the efficient policy response is to use public resources to augment the private consumption of those investors facing losses the anticipation of such a bailout distorts ex ante incentives leading intermediaries to choose arrangements with excessive illiquidity and thereby increasing financial fragility prohibiting bailouts is not necessarily desirable however it induces intermediaries to become too liquid from a social point of view and may in addition leave the economy more susceptible to a crisis a policy of taxing short term liabilities in contrast can correct the incentive problem while improving financial stability

run proof banking without suspension or deposit insurance abstract in a model of banking with asymmetric information among depositors and multiple sources of aggregate risk i show that a demand deposit arrangement with state contingent deposit payments and a priority of claims provision on final date resources is almost best under this arrangement intermediaries infer the realization of aggregate risk and of a privately observed signal on the outcome of the risky technology from depositors withdrawal choices and panics as well as information based runs are averted neither suspension provisions nor deposit insurance are necessary for an efficient run proof banking system furthermore intermediation provides information production services that a credit market does not necessarily provide

verifying a demand system by simulation abstract an intriguingly small value of the asymptotic standard error of the estimate of the income flexibility inspired us to simulate the demand system the procedure used should have more general applicability

the pbgc s flat fee schedule moral hazard and promised pension benefits abstract the pension benefit guarantee corporation pbgc initially insured private pension benefits in exchange for a premium that was not risk sensitive this paper derives conditions under which a moral hazard problem caused promised pension benefits to increase the hypotheses are tested using data on individual pension contracts from the pre and post pbgc periods

measuring the distance between relative price vectors of different countries abstract a simple measure is developed for the distance between relative price vectors it is applied to cross country data the procedure also provides a justification for the use of geometric mean prices in cross country demand analysis

market rate versus fixed rate demand deposits abstract in an economy with uninsured banks market rate deposits are shown to provide services identical to fixed rate deposits without risking banking panics as long as there is not both aggregate uncertainty about liquidity demands and asymmetric information about bank asset quality however if both factors are present then the preferred deposit form depends on the riskiness of bank assets and information revealed through market prices the analysis may explain the evolution of fixed rate deposits before the introduction of deposit insurance moreover it provides currently relevant insights regarding deposit contract forms and deposit insurance

world product and income international comparisons of real gross product the volume reports on the third phase of the united nations international comparison project icp the main results provide comparisons of real gross domestic product gdp per capita for thirty four countries in 1975 quantity and price comparisons are given also for personal consumption capital formation and public consumption and further subdivisions of final expenditures on gdp are estimated

avoiding bank runs in transition economies the role of risk neutral capital abstract in a general equilibrium model with risk neutral and risk averse agents we show that if banks issue both demand deposits and equity then free banking is run proof and efficient in particular we obtain the first best insurance solution if there is adequate risk neutral capital if sufficient risk neutral capital is unavailable then a partial suspension of convertibility is optimal in general therefore policies like capital adequacy norms and deposit insurance are neither necessary nor desirable