Risk externalities
Autor(a) principal: | |
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Data de Publicação: | 2018 |
Outros Autores: | |
Tipo de documento: | Artigo de conferência |
Idioma: | eng |
Título da fonte: | Repositório Institucional do FGV (FGV Repositório Digital) |
Texto Completo: | https://hdl.handle.net/10438/27741 |
Resumo: | Current analysis of macro-prudential policy has largely focused on excessive leverage and fire sales, while abstracting from firm-level risk and portfolio decisions. We show that these matter for the design of optimal interventions. We study a macroeconomic model in which firms make investment decisions in the presence of both aggregate and firm-specific risk. Financial constraints limit access to external funds and tie each firm's output to its net worth and a firm-specific return on investment. The laissez-faire outcome is constrained inefficient, as individual decisions fail to internalize their consequences on the distribution of risky returns over other agents (a risk externality). Firms are, at the same time, overexposed to aggregate risk and underexposed to idiosyncratic risk. In a quantitative exploration, interventions are shown to be counter-cyclical in their magnitude and to lead to large increases in aggregate TFP and output. |
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Iachan, Felipe SaraivaSilva, Dejanir H.Demais unidades::RPCAFGV2019-07-24T17:33:14Z2019-07-24T17:33:14Z2018-09-26https://hdl.handle.net/10438/27741Current analysis of macro-prudential policy has largely focused on excessive leverage and fire sales, while abstracting from firm-level risk and portfolio decisions. We show that these matter for the design of optimal interventions. We study a macroeconomic model in which firms make investment decisions in the presence of both aggregate and firm-specific risk. Financial constraints limit access to external funds and tie each firm's output to its net worth and a firm-specific return on investment. The laissez-faire outcome is constrained inefficient, as individual decisions fail to internalize their consequences on the distribution of risky returns over other agents (a risk externality). Firms are, at the same time, overexposed to aggregate risk and underexposed to idiosyncratic risk. In a quantitative exploration, interventions are shown to be counter-cyclical in their magnitude and to lead to large increases in aggregate TFP and output.engFirm-level uncertaintyRisk takingHedgingMisallocationPecuniary externalitiesEconomiaFinançasMacroeconomiaRisco (Economia)Empresas - FinançasRisk externalitiesinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/conferenceObjectinfo:eu-repo/semantics/openAccessreponame:Repositório Institucional do FGV (FGV Repositório Digital)instname:Fundação Getulio Vargas (FGV)instacron:FGVRede de Pesquisa e Conhecimento AplicadoORIGINALSED 2019 conference Society for Economic Dynamics-St. Louis - Missouri -....pdfSED 2019 conference Society for Economic Dynamics-St. Louis - Missouri -....pdfapplication/pdf925584https://repositorio.fgv.br/bitstreams/c7d35880-d31a-442d-87a1-6e55ee0afa0d/download8f226c363b12ace327d256786f093e21MD51LICENSElicense.txtlicense.txttext/plain; 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dc.title.eng.fl_str_mv |
Risk externalities |
title |
Risk externalities |
spellingShingle |
Risk externalities Iachan, Felipe Saraiva Firm-level uncertainty Risk taking Hedging Misallocation Pecuniary externalities Economia Finanças Macroeconomia Risco (Economia) Empresas - Finanças |
title_short |
Risk externalities |
title_full |
Risk externalities |
title_fullStr |
Risk externalities |
title_full_unstemmed |
Risk externalities |
title_sort |
Risk externalities |
author |
Iachan, Felipe Saraiva |
author_facet |
Iachan, Felipe Saraiva Silva, Dejanir H. |
author_role |
author |
author2 |
Silva, Dejanir H. |
author2_role |
author |
dc.contributor.unidadefgv.por.fl_str_mv |
Demais unidades::RPCA |
dc.contributor.affiliation.none.fl_str_mv |
FGV |
dc.contributor.author.fl_str_mv |
Iachan, Felipe Saraiva Silva, Dejanir H. |
dc.subject.eng.fl_str_mv |
Firm-level uncertainty Risk taking Hedging Misallocation Pecuniary externalities |
topic |
Firm-level uncertainty Risk taking Hedging Misallocation Pecuniary externalities Economia Finanças Macroeconomia Risco (Economia) Empresas - Finanças |
dc.subject.area.por.fl_str_mv |
Economia Finanças |
dc.subject.bibliodata.por.fl_str_mv |
Macroeconomia Risco (Economia) Empresas - Finanças |
description |
Current analysis of macro-prudential policy has largely focused on excessive leverage and fire sales, while abstracting from firm-level risk and portfolio decisions. We show that these matter for the design of optimal interventions. We study a macroeconomic model in which firms make investment decisions in the presence of both aggregate and firm-specific risk. Financial constraints limit access to external funds and tie each firm's output to its net worth and a firm-specific return on investment. The laissez-faire outcome is constrained inefficient, as individual decisions fail to internalize their consequences on the distribution of risky returns over other agents (a risk externality). Firms are, at the same time, overexposed to aggregate risk and underexposed to idiosyncratic risk. In a quantitative exploration, interventions are shown to be counter-cyclical in their magnitude and to lead to large increases in aggregate TFP and output. |
publishDate |
2018 |
dc.date.issued.fl_str_mv |
2018-09-26 |
dc.date.accessioned.fl_str_mv |
2019-07-24T17:33:14Z |
dc.date.available.fl_str_mv |
2019-07-24T17:33:14Z |
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https://hdl.handle.net/10438/27741 |
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eng |
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eng |
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openAccess |
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