Economics at your fingertips  

Securitized markets, international capital flows, and global welfare

Gregory Phelan () and Alexis Akira Toda ()

Journal of Financial Economics, 2019, vol. 131, issue 3, 571-592

Abstract: We study the effect of collateralized lending and securitization on international capital flows and welfare in a two-country general equilibrium model with idiosyncratic investment risk. The low-margin country (Home) endogenously supplies more safe assets and enables more risk sharing. Upon financial integration, capital flows from Foreign (high-margin country) to Home, leading to lower interest rates and a larger global supply of safe assets. Unlike in standard models with partial equity issuance, in our model, Home can lose from financial integration due to the endogenous reduction in risk sharing and aggregate shocks can generate large gross capital flows.

Keywords: Collateralized loan obligations; Endogenous risk sharing; Global imbalances; Gross international asset positions (search for similar items in EconPapers)
JEL-codes: D52 F32 F36 G11 G15 G23 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Securitized Markets, International Capital Flows, and Global Welfare (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-10-14
Handle: RePEc:eee:jfinec:v:131:y:2019:i:3:p:571-592