Replication data for: Optimal Regulation of Financial Intermediaries

Principal Investigator(s):  View help for Principal Investigator(s) Sebastian Di Tella

Version:  View help for Version V1

Name File Type Size Last Modified
  Suff-Stat 10/12/2019 06:44:AM
  temp-solutions 10/12/2019 06:44:AM
AER-Figures-3-and-4-and-quant.nb text/plain 203.9 KB 10/12/2019 02:44:AM
CE.nb text/plain 1.7 MB 10/12/2019 02:44:AM
README.lyx text/x-tex 6.2 KB 10/12/2019 02:44:AM
README.lyx- text/x-tex 6.1 KB 10/12/2019 02:44:AM
README.pdf application/pdf 52 KB 10/12/2019 02:44:AM
SP.nb text/plain 732.9 KB 10/12/2019 02:44:AM
Stationary-Distribution.nb text/plain 26.7 KB 10/12/2019 02:44:AM
transformation-CE.nb text/plain 62.1 KB 10/12/2019 02:44:AM

Project Description

Summary:  View help for Summary I characterize the optimal financial regulation policy in an economy where financial intermediaries trade capital assets on behalf of households, but must retain an equity stake to align incentives. Financial regulation is necessary because intermediaries cannot be excluded from privately trading in capital markets. They don't internalize that high asset prices force everyone to bear more risk. The socially optimal allocation can be implemented with a tax on asset holdings. I derive a sufficient statistic for the externality in terms of observable variables, valid for heterogeneous intermediaries and asset classes, and arbitrary aggregate shocks. I use market data on leverage and volatility of intermediaries' equity to measure the externality, which co-moves with the business cycle.

Scope of Project

JEL Classification:  View help for JEL Classification
      D82 Asymmetric and Private Information; Mechanism Design
      G01 Financial Crises
      G12 Asset Pricing; Trading Volume; Bond Interest Rates
      G20 Financial Institutions and Services: General
      G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
      H25 Business Taxes and Subsidies including sales and value-added (VAT)


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V1 [2019-10-12]

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