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Credit, Securitization and Monetary Policy: Watch Out for Unintended Consequences
Author:
Mr. Andrea Pescatori
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and
Mr. Juan Sole
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Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 076
Language:
English
Publication Date:
23 Mar 2016
DOI:
https://doi.org/10.5089/9781475522723.001
ISBN:
9781475522723
ISSN:
1018-5941
Pages:
21
Keywords:
WP; government sponsored enterprise; mortgage; bank; federal funds rate; asset; Monetary policy; monetary policy shocks; VAR; proxy VAR; financial intermediation; shadow banking; securitization; GSE; private-label ABS issuers; securitization activity; GSE assets; monetary policy shock; financing FHLB bank; GSE securitization; securitization market; Mortgages; Central bank policy rate; Monetary tightening; Loans; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We show evidence that interest rate hikes slowdown loan growth but lead intermediation to migrate from banks’ balance sheets to non-banks via increased securitization activity. As such, higher interest rates have the potential for unintended consequences; raising systemic risk rather than lowering it by pushing more intermediation activity to more weakly regulated sectors. In the past, this increased securitization activity was driven primarily byb private-label securitization. On the other hand, the government sponsored entities like Freddie Mac and Fannie Mae appear to react to higher policy rates by cutting back on their securitization activity but expanding loans to the Federal Home Loan Bank system.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2016: Issue 076