Securitization and the balance sheet channel of monetary transmission

This paper shows that the balance sheet channel of monetary transmission is stronger for US banks that securitize their assets. This finding is different, in spirit, from the widely-found negative relationship between financial development and the strength of the lending channel of monetary transmis...

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Bibliographic Details
Published inJournal of banking & finance Vol. 35; no. 8; pp. 2111 - 2122
Main Authors Aysun, Uluc, Hepp, Ralf
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.08.2011
Elsevier
Elsevier Sequoia S.A
SeriesJournal of Banking & Finance
Subjects
Balance sheet channel
Balance sheet channel Banks Bank holding companies Securitization
Balance sheets
Bank holding companies
Bank management
Banks
Federal Reserve monetary policy
Loans
Monetary reserves
Prices
Securitization
Security
Studies
United States > US
Securitization
F41
E44
F31
O16
Balance sheet channel
Banks
Bank holding companies
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Summary:This paper shows that the balance sheet channel of monetary transmission is stronger for US banks that securitize their assets. This finding is different, in spirit, from the widely-found negative relationship between financial development and the strength of the lending channel of monetary transmission. Focusing on the balance sheet channel, and using bank-level observations, we find that securitizing banks are more sensitive to borrowers’ balance sheets and that monetary policy has a greater impact on this sensitivity for securitizing banks. The optimality conditions from a simple partial equilibrium framework suggest that the positive effects of securitization on policy effectiveness could be due to the high sensitivity of security prices to policy rates.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2011.01.011