Subprime Borrowers, Securitization and the Transmission of Business Cycles
(2019) In Canadian Journal of Economics 52(4). p.1600-1654- Abstract
- A growing literature (i.e. Jaffee, Lynch, Richardson, and Van Nieuwerburgh 2009, Acharya and Schnabl 2009) argues that securitization improves financial stability if the securitized assets are held by capital market participants, rather than financial intermediaries. I construct a quantitative macroeconomic model with a novel specification for mortgage-backed securities (MBS) to evaluate this claim. My findings suggest that the existence of the securitization market stabilizes the economy under the condition that financial intermediaries do not engage in the acquisition of securitized assets. In the presence of large negative housing preference shocks, the drop in output in the first year after the shock is halved, if subprime MBS are... (More)
- A growing literature (i.e. Jaffee, Lynch, Richardson, and Van Nieuwerburgh 2009, Acharya and Schnabl 2009) argues that securitization improves financial stability if the securitized assets are held by capital market participants, rather than financial intermediaries. I construct a quantitative macroeconomic model with a novel specification for mortgage-backed securities (MBS) to evaluate this claim. My findings suggest that the existence of the securitization market stabilizes the economy under the condition that financial intermediaries do not engage in the acquisition of securitized assets. In the presence of large negative housing preference shocks, the drop in output in the first year after the shock is halved, if subprime MBS are purchased by non-financial agents, rather than held by banks. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/84efb7d1-6df5-4e0b-a2f4-336f48be5ca3
- author
- Grodecka-Messi, Anna LU
- organization
- publishing date
- 2019-11-29
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Canadian Journal of Economics
- volume
- 52
- issue
- 4
- pages
- 55 pages
- publisher
- Wiley-Blackwell
- external identifiers
-
- scopus:85075735391
- ISSN
- 1540-5982
- DOI
- 10.1111/caje.12414
- language
- English
- LU publication?
- yes
- id
- 84efb7d1-6df5-4e0b-a2f4-336f48be5ca3
- date added to LUP
- 2019-06-27 08:22:16
- date last changed
- 2022-03-25 21:14:13
@article{84efb7d1-6df5-4e0b-a2f4-336f48be5ca3,
abstract = {{A growing literature (i.e. Jaffee, Lynch, Richardson, and Van Nieuwerburgh 2009, Acharya and Schnabl 2009) argues that securitization improves financial stability if the securitized assets are held by capital market participants, rather than financial intermediaries. I construct a quantitative macroeconomic model with a novel specification for mortgage-backed securities (MBS) to evaluate this claim. My findings suggest that the existence of the securitization market stabilizes the economy under the condition that financial intermediaries do not engage in the acquisition of securitized assets. In the presence of large negative housing preference shocks, the drop in output in the first year after the shock is halved, if subprime MBS are purchased by non-financial agents, rather than held by banks.}},
author = {{Grodecka-Messi, Anna}},
issn = {{1540-5982}},
language = {{eng}},
month = {{11}},
number = {{4}},
pages = {{1600--1654}},
publisher = {{Wiley-Blackwell}},
series = {{Canadian Journal of Economics}},
title = {{Subprime Borrowers, Securitization and the Transmission of Business Cycles}},
url = {{http://dx.doi.org/10.1111/caje.12414}},
doi = {{10.1111/caje.12414}},
volume = {{52}},
year = {{2019}},
}