Deposit Bank Market Power and Central Banking

Abstract

This chapter provides the analysis of two areas of significant regulation of banks. First, there are multiple mechanisms to restrict market power in banks. The main topics covered in various sections are market structure, entry, and market power. Second, government intervention in banking is proposed for stabilization of the economy. The main topics covered are the general principles of central banking, the transmission of monetary policy, inflation targeting, and the Lucas Critique and consistency of optimal plans. The text is completed with a brief summary.