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Securitization and the balance sheet channel of monetary transmission

Uluc Aysun () and Ralf Hepp ()

Journal of Banking & Finance, 2011, vol. 35, issue 8, 2111-2122

Abstract: 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.

Keywords: Balance; sheet; channel; Banks; Bank; holding; companies; Securitization (search for similar items in EconPapers)
Date: 2011
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Working Paper: Securitization and the Balance Sheet Channel of Monetary Transmission (2010) Downloads
Working Paper: Securitization and the balance sheet channel of monetary transmission (2010) Downloads
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