1,720,967 research outputs found
Replication Data and Code for: Subprime borrowers, securitization and the transmission of business cycles
No full textThe data and programs replicate tables and figures from "Subprime borrowers, securitization and the transmission of business cycles", by Grodecka-Messi. Please see the ReadMe file for additional details
Private Bank Money vs Central Bank Money: A Historical Lesson for CBDC Introduction
No full textIn this paper, a unique event is studied: the opening of Bank of Canada in 1935, the central bank note issuance monopoly and its impact on the note issuing chartered banks. Between 1935-1950, Canadian chartered banks had to gradually withdraw their notes from circulation. In a difference-in-differences analysis, I show that chartered banks constrained by new issuance limits experienced higher volatility of return-on-equity in the short run and lower Z-scores and return-on-assets in the longer horizon, suggesting that note issuance was an important source of revenue for private banks and allowed them to smooth the profits. The effect on lending is either non-significant or ambiguous. This study of central bank cash implementation can offer lessons for the current debates on a new form of central bank money - central bank digital currencies - and their potential impacts on commercial banks
Private bank money vs central bank money: A historical lesson for CBDC introduction
No full textCentral banks have been considering the introduction of central bank digital currencies (CBDCs). The theoretical literature indicates that this may influence private banks' lending activity and their profitability with implications for financial stability. To provide empirical evidence on this debate, we study the effects of the arrival of a new central-bank issued currency on commercial banks in a historical setup. We use the opening of the Bank of Canada in 1935 as a natural experiment to provide evidence that banks mostly affected by the currency competition experienced lower profitability but did not decrease their lending compared to unaffected peer
Private Bank Money vs Central Bank Money: A Historical Lesson for CBDC Introduction [Elektronisk resurs]
No full textIn this paper, a unique event is studied: the opening of Bank of Canada in 1935, the central bank note issuance monopoly and its impact on the note issuing chartered banks. Between 1935-1950, Canadian chartered banks had to gradually withdraw their notes from circulation. In a difference-in-differences analysis, I show that chartered banks constrained by new issuance limits experienced higher volatility of return-on-equity in the short run and lower Z-scores and return-on-assets in the longer horizon, suggesting that note issuance was an important source of revenue for private banks and allowed them to smooth the profits. The effect on lending is either non-significant or ambiguous. This study of central bank cash implementation can offer lessons for the current debates on a new form of central bank money - central bank digital currencies - and their potential impacts on commercial banks
Subprime Borrowers, Securitization and the Transmission of Business Cycles
No full textA 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
Predictors of Bank Distress : The 1907 Crisis in Sweden
No full textThis paper studies the Swedish experience of the international crisis of 1907, which is often compared with the crisis of 2008. By constructing a new dataset from previously unanalyzed monthly bank-level data, we document high-frequency changes in bank outcomes throughout the 1907 crisis. While distressed banks suffered substantial withdrawals of foreign funds and liquid domestic liabilities, we show that banks’ asset structures, along with observable fundamentals and institutional characteristics, played a more significant role in their subsequent fate. Higher shares of non-performing assets and lending against equities were the most important balance sheet predictors of distress. These balance sheet fundamentals, as well as over-extended branch networks, significantly shortened the lifespan of Swedish banks in the aftermath of the 1907 crisis
Subprime Borrowers, Securitization and the Transmission of Business Cycles
No full textA 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
Riding the housing wave: Home equity withdrawal and consumer debt composition
No full textUsing a monthly panel dataset of individuals' debt, we show that house price changes can explain a significant fraction of personal debt composition dynamics. We exploit the variation in local house price growth as shocks to homeowners' housing wealth to study the consequential adjustment of debt portfolio. We present direct evidence that homeowners re-optimize their debt structure by using parts of withdrawn home equity to pay down comparatively expensive non-mortgage debt during a housing boom. The effect is strongest for homeowners that have a high debt-to-income ratio and live in a municipality with a high literacy level. We find evidence that macroprudential policy and interest rates are important for consumer debt decisions
- …
