Securitization and aggregate investment efficiency

This paper studies the efficiency of competitive equilibria in economies where expansion investment is facilitated by securitization. We show that use securitization generally associated with constrained inefficient aggregate investment, thereby potentially justifying regulatory intervention markets for securitized assets. examine effectiveness two real-world policy instruments to address this inefficiency: ex-ante capital / leverage requirements, as well skin-in-the game (retention) requirements. find leverage/capital restrictions can increase welfare our environment, but forcing originators hold additional not improving.