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Improving Public Equity Markets? No Pain, No Gain

Katya Kartashova ()

Staff Working Papers from Bank of Canada

Abstract: This paper quantifies the effects of improving public equity markets on macroeconomic aggregates and welfare. I use an open-economy extension of Angeletos (2007), where entrepreneurs face idiosyncratic productivity risk in privately held firms. They can diversify by investing in publicly traded firms, but their operation is costly. These costs can vary across different economies. To quantify the effect of the differences and impose discipline, I parameterize the model using Ecuadorian and Chilean firm-level and aggregate data. Lower equity costs result in improvement of economic aggregates, but have differential welfare effects. Entrepreneurs suffer a loss, while workers gain.

Keywords: Development economics; Financial Institutions; Financial markets (search for similar items in EconPapers)
JEL-codes: E44 G11 O11 O16 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2014
New Economics Papers: this item is included in nep-dge and nep-mac
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Journal Article: Improving public equity markets? No pain, no gain (2018) Downloads
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