An Analytical Framework for Financial Institutions Management

This paper develops an economic model to explain and predict the impact of change in financial markets on financial institutions. In particular, the changing relationship between the Reserve Bank of Australia and Australian Banks is examined along with the resulting impact of increased competition in finanancial intermediation on banks. Empirical financial data for the period 1984 to 1994 is presented in reduced form to fit the analytical model in both algebraic and geometric form.