NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sebastian Di Tella

Stanford University
Graduate School of Business
655 Knight Way
Stanford, CA 94305
Tel: 650/725-8767

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
WWW:
NBER Program Affiliations: EFG
NBER Affiliation: Faculty Research Fellow

NBER Working Papers and Publications

July 2017Optimal Regulation of Financial Intermediaries
w23586
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/optimal policy in terms of observable variables, valid for heterogenous 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...
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us