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User Costs, the Financial Firm, and Monetary and Regulatory Policy

Author

Listed:
  • Apostolos Serletis

    (University of Calgary)

  • Maksim Isakin

Abstract

We investigate how key monetary policy instruments and financial regulation affect the banking firm. We take the user cost approach to the construction of prices for financial services and use quarterly data on the U.S. commercial banking sector, over the period from 1992 to 2016, obtained from the Federal Deposit Insurance Corporation. We use the symmetric generalized Barnett variable profit function to derive demands for and supplies of monetary and non-monetary goods and provide evidence consistent with neoclassical microeconomic theory. We find that the compensated price elasticities of banking technology are small in magnitude. Yet a hypothetical policy experiment shows that even small changes in the holding costs of financial goods can result in significant changes in user costs and the quantities demanded and supplied.

Suggested Citation

  • Apostolos Serletis & Maksim Isakin, "undated". "User Costs, the Financial Firm, and Monetary and Regulatory Policy," Working Papers 2018-12, Department of Economics, University of Calgary, revised 14 Oct 2018.
    • Handle: RePEc:clg:wpaper:2018-12
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    Cited by:

    1. Diewert, W. Erwin, 2015. "A Note on the Flexibility of the Barnett and Hahm Functional Form," Economics working papers erwin_diewert-2015-1, Vancouver School of Economics, revised 09 Jan 2015.

    More about this item

    Keywords

    Commercial banks; Generalized Barnett variable profit function; Flexible functional forms;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services
    • D2 - Microeconomics - - Production and Organizations
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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