An Investigation of Some Macro-Financial Linkages of Securitization / Xin Long, Mangal Goswami, Andreas Jobst.

Format:

Book

Government document

Author/Creator:

Long, Xin.

Contributor:

Goswami, Mangal.

Jobst, Andreas.

Series:

IMF Working Papers; Working Paper ; No. 2009/026

IMF Working Papers

Language:

English

Subjects (All):

Financial crises.

Asset-backed financing.

Physical Description:

46 p.

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2009.

Language Note:

English

Summary:

Policy-makers have attributed the scale of the credit crisis and its profound impact on money markets (as well as financial sector stability) to the fast rise of securitization and the way it has arguably complicated both the conduct of monetary policy and the effect of interest rate transmission to the real economy. In our study, we examine whether financial innovation, specifically through securitization, has altered the nature of some macro-financial linkages, often with considerable policy implications. We find that securitization activity in the United States (mature market) and South Africa (emerging market) has indeed dampened the interest rate elasticity of real output via the balance sheet channel (while decreasing the interest rate pass-through from policy rates to market rates). That being said, current reservations about securitization do not invalidate the fact that securitization activity helps cushion the immediate impact of interest rate shocks to loan origination, which might be particularly effective in EM countries where poorly developed capital markets provide few alternatives to bank lending.

Contents:

Intro

Contents

I. Introduction

II. Empirical Analysis

A. Macro-Financial Linkages in Mature Economies-Evidence from U.S. Secondary Mortgage Market

B. Macro-financial Linkages in Emerging Economies-Evidence from South African Mortgage Market

III. Conclusion

References

Box 1. Mortgage Securitization in South Africa

Tables

1. United States-OLS Estimation Results: IS Dynamic Equation of Output Gap with Instrumental Variable Controls for Securitization and Financial Depth (1970-2006)

2. United States-Estimation Results: VAR(2,2) Simultaneous Equation Model with Model with Instrumental Variable Controls for Securitization and Financial Depth (1970-2006)

3. United States-OLS Estimation Results of the Mortgage Interest Rate Pass-through, with Instrumental Variable Controls for Securitization (1970-2006)

4. United States-Summary Table of OLS Estimation Results for Interest Rate Pass-through (Different Time Periods)

5. South Africa-OLS Estimation Results: IS Dynamic Equation of Output Gap with Instrumental Variable Controls for Securitization (1965-2006)

6. South Africa-Estimation Results: VECM(3,2) Simultaneous Equation Model of Balance Sheet Effects (Bank Lending) with Instrumental Variable Control for Securitization (1987-2006 and 2002-2006)

7. South Africa-Estimation Results: VECM (3,2) Simultaneous Equation Model of Balance Sheet Effects (Bank Securities Investment) with Instrumental Variable Control for Securitization (1987-2006 and 2002-2006)

8. South Africa-Estimation Results: VECM (3, 2) Simultaneous Equation Model of Balance Sheet Effects (Bank Deposits) with Instrumental Variable Control for Securitization (1987-2006 and 2002-2006).

9. South Africa-Estimation Results (Summary Table): VECM (3,2) Model Simultaneous Equation Model of Balance Sheet Effects (Bank Lending, Bank Deposits, Bank Securities Investments) with Instrumental Variable Control for Securitization (1987-2006 and 2002-2006)

Figures

1. Transmission Channels of Monetary Policy in the United States

2. Mortgage-Related Securitization (Outstanding and Issuance) in the United States, Emerging Markets, and South Africa

3. Stock of U.S. Mortgage-Backed Securities (In billions of U.S. dollars, 1966-2006)

4. United States

Impulse-Response Graphs of Interest Rate Elasticity: VAR (5,2) Simultaneous Equation Model with Instrumental Variable Controls for Securitization and Financial Depth (1970-2006)

5. United States-Impulse-Response Graphs of Interest Rate Elasticity: VAR (5,2) Simultaneous Equation Model with Instrumental Variable Controls for Securitization and Financial Depth (1970-1990)

6. United States-Impulse-Response Graphs of Interest Rate Elasticity: VAR (5,2) Simultaneous Equation Model with Instrumental Variable Controls for Securitization and Financial Depth (1991-2006)

7. South Africa-Impulse-Response Graphs of Interest Rate Elasticity: VECM (3,2) Simultaneous Equation Mode of Balance Sheet Effects (with Bank Lending as Bank Balance Sheet Variable)with and without Control for Securitization (1987-2006 and 2002-2006)

8. South Africa-Impuls-Response Graphs of Interest Rate Elasticity: VECM (3,2) Simultaneous Equation Model of Balance Sheet Effects (with Bank Securities I nvestment as Bank Balance Sheet Variable wit and without Control for Securitization (1987-2006 and 2002-2006).

9. South Africa-Impulse-Response Graphs of Interest Rate Elasticity: VECM (3,2) Simultaneous Equation Model of Balance Sheet Effects (with Bank Deposits as Bank Balance Sheet Variable) with and without Control for Securitization (1987-2006 and 2002-2006).

Notes:

Bibliographic Level Mode of Issuance: Monograph

Includes bibliographical references.

Description based on print version record.

ISBN:

9786612842481

9781462323494

1462323499

9781452783376

1452783373

9781451871739

1451871732

9781282842489

128284248X

OCLC:

680613573