| Description |
1 online resource (42 pages) : illustrations |
| Series |
IMF working paper ; WP/13/247 |
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IMF working paper ; WP/13/247.
|
| Contents |
Cover; Contents; 1 Introduction; List of Figures; 1 Bank equity, interest rate spread and wage bill; 2 Bank Capital and Workers; 2.1 Model Setup; 2.2 First-Best Allocation; 2.3 Financial Constraint; 2 Timeline; 3 Laissez-Faire Equilibrium; 3.1 Period 1 Equilibrium; 3.2 Marginal Value of Bank Capital; 3 Welfare and marginal value of bank capital e; 3.3 Determination of Period 0 Risk Allocation; 4 Pareto Frontier; 4.1 Market Incompleteness and the Distributive Conflict; 4 Pareto frontier; 4.2 Financial Regulation; 5 Risk-Taking and Redistribution; 5.1 Asymmetric Compensation Schemes |
|
5.2 Financial Institutions with Market Power5.3 Financial Innovation; 5.4 Bailouts; 5 Welfare and marginal value of bank capital under bailouts; 6 Pareto frontier under bailouts; 6 Conclusions; A: Technical Appendix; A.1 Proofs; A.2 Period 0 Production Function; A.3 Variants of Bailouts; B: Model Parameterization; C: Data Sources |
| Summary |
"Financial regulation is often framed as a question of economic efficiency. This paper, by contrast, puts the distributive implications of financial regulation center stage. We develop a model in which the financial sector benefits from risk-taking by earning greater expected returns. However, risk-taking also increases the incidence of large losses that lead to credit crunches and impose negative externalities on the real economy. Assuming incomplete risk markets between the financial sector and the real economy, we describe a Pareto frontier along which different levels of risk-taking map into different levels of welfare for the two parties. A regulator has to trade off efficiency in the financial sector, which is aided by deregulation, against efficiency in the real economy, which is aided by tighter regulation and a more stable supply of credit. We also show that financial innovation, asymmetric compensation schemes, concentration in the banking system, and bailout expectations enable or encourage greater risk-taking and allocate greater surplus to the financial sector at the expense of the rest of the economy"--Abstract |
| Notes |
At head of title: Research Department |
|
"December 2013." |
| Bibliography |
Includes bibliographical references |
| Subject |
Financial services industry -- Deregulation -- Econometric models
|
|
Financial risk management -- Econometric models
|
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Global Financial Crisis, 2008-2009.
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| Form |
Electronic book
|
| Author |
Kreamer, Jonathan, author.
|
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International Monetary Fund. Research Department.
|
| ISBN |
9781484307953 |
|
148430795X |
|
