Endogeneous Risk in Monopolistic CompetitionPreprint OPEN
Vladislav Damjanovic; (2012)
Subject: Competition and Risk, Risk in DSGE models, Bank competition; Bank failure, Default correlation, Risk-shifting effect, Margin effect.
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.