The Private Financial Sector

The private financial sector in this study consists of depository institutions behaving as though they were a centralized unit. The objective of this sector at time t is to maximize its present value. It formulates its plans for the “current” and “next” periods in a manner that maximizes the amount which its shareholders would have to place in their next best alternative (presumably in equity shares issued by the nonfinancial business sector) at time t in order to duplicate (period by period) the income which the private financial sector contemplates distributing to its owners over each of the next two periods.