THE THEORY OF FINANCIAL INTERMEDIATION: AN ESSAY ON WHAT IT DOES (NOT) EXPLAIN

Chia sẻ: Nguyen Nhi | Ngày: | Loại File: PDF | Số trang:59

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THE THEORY OF FINANCIAL INTERMEDIATION: AN ESSAY ON WHAT IT DOES (NOT) EXPLAIN

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This essay reflects upon the relationship between the current theory of financial intermediation and real-world practice. Our critical analysis of this theory leads to several building blocks of a new theory of financial intermediation. Current financial intermediation theory builds on the notion that intermediaries serve to reduce transaction costs and informational asymmetries. As developments in information technology, deregulation, deepening of financial markets, etc. tend to reduce transaction costs and informational asymmetries, financial intermediation theory shall come to the conclusion that intermediation becomes useless. This contrasts with the practitioner’s view of financial intermediation as a value-creating economic process. It also conflicts with the continuing and increasing economic importance of financial intermediaries. From this...

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