Microeconomics of Banking
Course Name: Microeconomics Of Banking
Teacher: Dimitrios Karanastasis
School: Finance and Statistics
Department: Banking & Financial Management
Level: Undergraduate
Course ID: ΧΡΤΜΙ01 Semester: 5th & 7th
Course Type: Elective Course, Special Background
Prerequisites: –
Teaching and Exams Language: Greek
Course Availability to Erasmus Students: Yes (in Greek)
Course webpage: https://eclass.unipi.gr/courses/XTD151/
Specific Teaching Activities |
Weekly Teaching Hours |
Credit Units |
|---|---|---|
4 |
6 |
Course Content
1) Basic Microeconomic Concepts, Preferences -Utility – Consumer’s Behavior – Demand – Elasticity of Demand- Utility under Risk and Uncertainty – Producer’s Behavior – Economies of Scale – Profit Function – Markup of Producer
2) Market Structure of Banking Sector, The Klein-Monti Model. Monopolistic Bank – Various Forms of Cost – Perfect Competition – Cournot Duopoly – Duopoly with Asymmetric Cost -Stackelberg Duopoly with Linear Cost.
3) Banks as Liquidity Provider, The Diamond-Dybvig Model. Demand for Liquid Assets – The Banks as Liquidity Provider – Optimal Liquidity – Bank Runs – Solutions
4) Moral Hazard. Basic Model – Solution with Symmetric Information – Introducing Moral Hazard -The Second Best Solution – A Numerical Example
5) Adverse Selection. Basic Model – Solution with Compete Information – Solution with Symmetric Information – Symmetric Information with Risk Aversion – A Numerical Example
6) Signaling. Basic Model – Noisy Signals
7) Incomplete Contracts. Definition – A Model of Venture Capital – Incomplete Contracts and Ownership
8) The “Winner’s Curse”. The Banking Problem – Basic Model – Due Diligence – Monopolistic Bank and Duopoly
9) Money. The Overlaping Generations Model. Central Planning – Golden Rule – The Record Keeping Equilibrium – Monetary Equilibrium – Money Supply – Monetary Model with Production -banks as Liquidity Creators
Teaching Results
| This course is an introduction into the microeconomic foundations of modern banking theory and the financial intermediation. Particular emphasis is put on the presentation of microeconomic models with asymmetric information.
Upon completion of the course, students ought to possess the basic toolkit of microeconomic theory and more particularly of contract theory for the understanding of various phenomena in the banking industry and the functioning of credit institutions. Among others, students ought to be familiar with the market structure and organization of credit markets, the role of banks as liquidity providers and as monitors of creditworthiness of debtors. In this framework, it will also be investigated the role of monetary economy and the importance of financial stability. |
General Skills
- Individual Work
- Decision Making
- Analytical Thinking and Synthesis of Economic Information
