Microeconomics of Banking, 2nd Edition

Over the last thirty years, a new paradigm in banking theory has
overturned economists’ traditional vision of the banking sector. The
asymmetric information model, extremely powerful in many areas of
economic theory, has proven useful in banking theory both for
explaining the role of banks in the economy and for pointing out
structural weaknesses in the banking sector that may justify government
intervention. In the past, banking courses in most doctoral programs in
economics, business, or finance focused either on management or
monetary issues and their macroeconomic consequences; a microeconomic
theory of banking did not exist because the Arrow-Debreu general
equilibrium model of complete contingent markets (the standard
reference at the time) was unable to explain the role of banks in the
economy. This text provides students with a guide to the microeconomic
theory of banking that has emerged since then, examining the main
issues and offering the necessary tools for understanding how they have
been modeled.

This second edition covers the recent dramatic
developments in academic research on the microeconomics of banking,
with a focus on four important topics: the theory of two-sided markets
and its implications for the payment card industry; “non-price
competition” and its effect on the competition-stability tradeoff and
the entry of new banks; the transmission of monetary policy and the
effect on the functioning of the credit market of capital requirements
for banks; and the theoretical foundations of banking regulation, which
have been clarified, although recent developments in risk modeling have
not yet led to a significant parallel development of economic modeling.

Forex Banking And Trading - Microeconomics of Banking, 2nd Edition

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