Publication

This paper creates a bridge between the macroeconomic and finance literature by embedding a micro-founded "Originate to Distribute" (OTD) model of banking into a standard macro framework. This will help to analyze the interplay between the monetary transmission mechanism and the market for credit risk transfer. Second, it aims at analyzing the macroeconomic impact of some of the dis-functionalities, particularly those stemming from the moral hazard problems associated with loan sales. Such dis-functionalities might, indeed, have been responsible for inducing excessive risk taking behavior on the banking side and might have amplified aggregate risk.