Endogeneous Risk in Monopolistic Competition

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Vladislav Damjanovic;
  • Subject: Competition and Risk, Risk in DSGE models, Bank competition; Bank failure, Default correlation, Risk-shifting effect, Margin effect.
    • jel: jel:E43 | jel:D43 | jel:E13 | jel:G21 | jel:G24

We consider a model of financial intermediation with a monopolistic competition market structure. A non-monotonic relationship between the risk measured as a probability of default and the degree of competition is established.
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