An Investigation of Some Macro-Financial Linkages of Securitization

By Xin Long, Mangal Goswami, Andreas Jobst

February 1, 2009

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Xin Long, Mangal Goswami, and Andreas Jobst. An Investigation of Some Macro-Financial Linkages of Securitization, (USA: International Monetary Fund, 2009) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Central bank policy rate, Financial institutions, Financial services, Financial statements, Mortgages, Public financial management (PFM), Real interest rates, Securitization

Keywords: Africa, Asset class, Asset securitization, Bank balance, Bank balance sheet, Central bank policy rate, Credit channel, Financial innovation, Financial statements, Interest rate, Interest rate channel, Interest rate elasticity, Interest rate pass-through, Macro-financial linkages, Monetary policy, Monetary transmission, Mortgage market, Mortgage rate, Mortgage securitization, Mortgages, Output gap, Real interest rates, Securitization, Securitization activity, Securitization market, Securitization mechanism, Securitization ratio, Structured finance, Transmission mechanism, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/026
Stock No:

WPIEA2009026
ISBN:

9781451871739
ISSN:

1018-5941

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