The Financial Firm: Production with Monetary and Nonmonetary Goods

  title={The Financial Firm: Production with Monetary and Nonmonetary Goods},
  author={D. Hancock},
  journal={Journal of Political Economy},
  pages={859 - 880}
  • D. Hancock
  • Published 1985
  • Economics
  • Journal of Political Economy
  • A macroeconomic theory of the financial firm is developed that is empirically testable. Financial firms are deposit-taking intermediaries issuing their own liabilities, exemplified by banks. User costs are derived for monetary goods such as demand and time deposits. From the variable profit function, demands for and supplies of monetary and nonmonetary goods are derived. A sample of New York and New Jersey banks indicates that regularity conditions in production are satisfied. The financial… CONTINUE READING
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