Securitization and aggregate investment efficiency

Afrasiab Mirza and Eric Stephens

Journal of Financial Intermediation, 2022, vol. 52, issue C

Abstract: This paper studies the efficiency of competitive equilibria in economies where the expansion of investment is facilitated by securitization. We show that the use of securitization is generally associated with constrained inefficient aggregate investment, thereby potentially justifying regulatory intervention in markets for securitized assets. We examine the effectiveness of two real-world policy instruments to address this inefficiency: ex-ante capital / leverage requirements, as well as skin-in-the game (retention) requirements. We find that leverage/capital restrictions can increase welfare in our environment, but that forcing originators to hold additional skin-in-the game is not welfare improving.

Keywords: Securitization; Pecuniary externalities; Financial frictions; Macroprudential regulation; Fire-sales; Incomplete markets; retention requirements; Skin-in-the-game (search for similar items in EconPapers)
JEL-codes: D52 D53 E44 G18 G23 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042957320300486
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Securitization and Aggregate Investment Efficiency (2017)
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: https://EconPapers.repec.org/RePEc:eee:jfinin:v:52:y:2022:i:c:s1042957320300486

DOI: 10.1016/j.jfi.2020.100894

Access Statistics for this article

Journal of Financial Intermediation is currently edited by Elu von Thadden

More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().