مشارکت در بازار مالی، واسطه گری مالی و سیاست پولی

It is not uncommon for the Friedman rule to be optimal in neoclassical models with money. Notably, previous studies also find that financial intermediation is not welfare improving when money is costless to hold. This paper departs from previous studies by highlighting the importance of participation costs in financial markets for the participation in financial intermediation and monetary policy. As in previous work, the Friedman rule is optimal. However, I demonstrate that the welfare gains from disinflation are much higher when savings are intermediated if direct participation costs in financial markets are significant. Consequently, financial intermediation can still be optimal at the Friedman rule.

Standard neoclassical models with money often find that the Friedman rule is optimal.1 However, monetary growth models with an endogenous role of financial intermediaries, demonstrate that banks do not improve welfare when money is costless to hold.2 In a setting where agents are subject to idiosyncratic liquidity risk, the gains from intermediation depend strictly on the ability of intermediaries to provide risk sharing services and the cost of intermediation services. When money and other assets yield the same rate of return, agents can completely insure themselves against liquidity risk. Therefore, agents have no incentive to incur an additional cost to intermediate their savings. Notably, previous work assumes that it is costless to participate directly in financial markets. However, as pointed out by Allen and Santomero (1998), costs of direct financial participation had significant implications for financial intermediation in the United States between 1980 and late 1990s. In particular, the authors point out that direct participation costs in financial markets have increased significantly over that time period.3 Such costs may explain the decline in households’ direct participation in capital markets and the increase in the reliance on mutual funds as a source of investment. Financial intermediaries such as mutual funds firms have low participation costs and thus provide an efficient channel for investors with high direct participation costs. This paper highlights the importance of participation costs in financial markets for the participation in financial intermediation and monetary policy. In particular, I examine an economy where direct participation in financial markets is costly, money is essential, and financial intermediaries form endogenously. As in previous work, the Friedman rule is optimal. However, I demonstrate that the welfare gains from disinflation are much higher when savings are intermediated if direct participation costs in financial markets are significant. Consequently, financial intermediation can still be optimal at the Friedman rule. This paper is organized as follows. In Section 2, I describe the model and study the behavior of agents. I offer concluding remarks in Section 3.

Previous studies on endogenous financial intermediation suggest that agents are better off not participating in intermediation when the Friedman rule is optimal. In a setting where agents are subject to liquidity risk, agents can completely insure themselves against liquidity risk when money is costless to hold. Therefore, agents have no incentive to incur an additional cost to use the bank. In contrast to previous work such as Smith (2003), I consider a setting where financial intermediaries also reduce participation costs in financial markets through economies of scale. As I demonstrate in the text, the welfare costs of inflation under financial intermediation increase with the extent of economies of scale in the banking sector. Therefore, there are significant gains from financial intermediation at the Friedman rule rate of money creation.