Document Type
Discussion Paper
Publication Date
12-1-1990
CFDP Number
964
CFDP Pages
24
Abstract
We utilize the strategic market game approach to analyze the role and function of a mutual bank with variable fractional reserves, redemption in gold and endogenous interest rate formation. We specify the conditions of enough money and its distribution. Using the continuum of traders model, we show existence and optimality for the case of no bankruptcy as well as for the case in which there exists the potentiality of bankruptcy. Finally, we analyze the relationship of the gearing ratio and the bankruptcy penalty with respect to the resulting equilibrium allocations.
Recommended Citation
Shubik, Martin and Tsomocos, Dimitrios P., "A Strategic Market Game with a Mutual Bank with Fractional Reserves and Redemption in Gold (A Continuum of Traders)" (1990). Cowles Foundation Discussion Papers. 1207.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1207