Zero-risk weights and capital misallocation

IF 6.1 2区 经济学 Q1 BUSINESS, FINANCE Journal of Financial Stability Pub Date : 2024-04-20 DOI:10.1016/j.jfs.2024.101264
Takuji Fueki , Patrick Hürtgen , Todd B. Walker
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Abstract

Financial institutions, especially in Europe, hold a disproportionate amount of domestic sovereign debt. We examine the extent to which this home bias leads to capital misallocation in a real business cycle model with imperfect information and fiscal stress. We assume banks can hold sovereign debt according to a zero-risk weight policy and contrast this scenario to one in which banks weight the sovereign debt according to default probabilities. Banks are assumed to miscalculate the probability of a disaster state due to moral hazard and imperfect monitoring. This distortion pushes the economy away from the first-best allocation. We show that the zero risk weight policy exacerbates these distortions while a non-zero risk-weight improves allocations. The welfare costs associated with zero-risk weight policies are large. Households are willing to give up 3.2 percent of their consumption to move to the first-best allocation, whereas in the economy with non-zero risk-weights households are willing to give up only 1.2 percent of their consumption to move to the first-best allocation.

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零风险权重和资本错配
金融机构,尤其是欧洲的金融机构,持有过多的国内主权债务。我们研究了在信息不完善和财政紧张的实际商业周期模型中,这种国内偏好在多大程度上导致了资本配置失当。我们假设银行可以根据零风险权重政策持有主权债务,并将这种情况与银行根据违约概率对主权债务进行权重的情况进行对比。由于道德风险和不完善的监督,我们假设银行会误判灾难状态的发生概率。这种扭曲会使经济偏离第一最优配置。我们的研究表明,零风险权重政策会加剧这些扭曲,而非零风险权重则会改善分配。与零风险权重政策相关的福利成本很大。家庭愿意放弃 3.2% 的消费来转向最优配置,而在非零风险权重经济中,家庭只愿意放弃 1.2% 的消费来转向最优配置。
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来源期刊
CiteScore
7.70
自引率
9.30%
发文量
78
审稿时长
34 days
期刊介绍: The Journal of Financial Stability provides an international forum for rigorous theoretical and empirical macro and micro economic and financial analysis of the causes, management, resolution and preventions of financial crises, including banking, securities market, payments and currency crises. The primary focus is on applied research that would be useful in affecting public policy with respect to financial stability. Thus, the Journal seeks to promote interaction among researchers, policy-makers and practitioners to identify potential risks to financial stability and develop means for preventing, mitigating or managing these risks both within and across countries.
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