Product Description

"The authors have provided an extremely thorough and up-to-date survey of microeconomic theories of financial intermediation. This work manages to be both rigorous and pleasant to read. Such a book was long overdue and should be required reading for anybody interested in the economics of banking and finance." -- Mathias Dewatripont, Professor of Economics, ECARE, Université Libre de Bruxelles

Twenty years ago, most banking courses focused on either management or monetary aspects of banking, with no connecting. Since then, a microeconomic theory of banking has developed, mainly through a switch of emphasis from the modeling of risk to the modeling of imperfect information. This asymmetric information model is based on the assumption that different economic agents possess different pieces of information on relevant economic variables, and that they will use the information for their own profit. The model has been extremely useful in explaining the role of banks in the economy. It has also been useful in pointing out structural weaknesses of the banking sector that may justify government intervention--for example, exposure to runs and panics, the persistence of rationing in the credit market, and solvency problems.

Microeconomics of Banking provides a guide to the new theory. Topics include why financial intermediaries exist, the industrial organization approach to banking, optimal contracting between lenders and borrowers, the equilibrium of the credit market, macroeconomic consequences of financial imperfections, individual bank runs and systemic risk, risk management inside the banking firm, and bank regulation. Each chapter ends with a detailed problem set and solutions.

Product Details

• Amazon Sales Rank: #934765 in Books
• Published on: 1997-10-17
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 312 pages

Review
"Freixas and Rochet have coauthored an excellent book, encompassing most of the major developments in the theoretical literature of the last twenty years on credit markets and rationing, the monitoring and risk-sharing roles of financial intermediaries, the modelling of liquidity risk and its allocational consequences, bank runs and attendant regulatory measures, and the control of risk-taking by banks subject to deposit insurance. Elegant in its conception, comprehensive in its coverage of the core literature, and lucid in its expositional clarity, this book should be suitable for Masters level and advanced undergraduate courses on Money and Banking, as well as a background reference book for specialized Doctoral courses in Finance. Professors Freixas and Rochet, whose earlier research work provided major impetus to Contract Theory, have made a splendid and much needed expositional contribution to their recently adapted field of Financial Economics, for students and teachers alike." -- Sudipto Bhattacharya, Professor of Finance, London School of Economics

"The authors have provided an extremely thorough and up-to-date survey of microeconomic theories of financial intermediation. This work manages to be both rigorous and pleasant to read. Such a book was long overdue and should be required reading for anybody interested in the economics of banking and finance."
—Mathias Dewatripont, Professor of Economics, ECARE, Université Libre de Bruxelles

About the Author
Xavier Freixas is the Houblon Norman Fellow at the Bank of England. Jean-Charles Rochet is Professor of Economics at Université des Sciences Sociales de Toulouse, France.

Customer Reviews

SEMINAL
Do you want to understand the Asian Crisis or the crisis in Argentina? This book is already a classic of modern economics. As such, it is a must read for anyone with a serious interest in economics, as well as in finance, or monetary fragility, for that matter. It is the first comprehensive, as well as comprehensible, coherent, well organized and well written, presentation of a revolution in our understanding of monetary, banking and financial markets which has developed over the past twenty years. Further, using this book, in combination with Champ and Freeman, Modeling Monetary Economies, and Cooper, Coordination Games: Complementarities and Macroeconomics, it is finally possible to present sensible economics to the advanced undergraduate/junior graduate student. Truly pathbreaking.

A fine literature review
This book illustrates the "microeconomic theory" behind the functioning of banking institutions. It is in the format of an academic literature review on this subject. The level is for upper undergrads or grad students. Ideal for use with a "topics in advanced microeconomics" Or "asymmetric information" course. Yet as concise as it might be, the book lacks motivation to the reader. The results can be better put into context.

Excelent!!!
Un excelente libro para los estudiantes de economía que quieran adentrarse en tópicos bancarios, en especial en los riesgos en que incurren estas instituciones y los problemas de agencia que existen en esta industria. Muy útil para reguladores. Solo lamento que este concentrado en Banca Comercial y deje un poco de lado el análisis de la Banca Universal.