An Analysis about the Long Term Impact of Banks Securitization on Economic Growth

Neda Jamshidi (), Mohammad Vaez Barzani () and Mahdi Toghyani ()
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Neda Jamshidi: Department of Economics, University of Isfahan
Mohammad Vaez Barzani : Department of Economics, University of Isfahan
Mahdi Toghyani : Department of Economics, University of Isfahan

Journal of Money and Economy, 2021, vol. 16, issue 3, 283-304

Abstract: Economic growth is the most common goal in any economy, and capital is one of the most important determinants of growth. In the last few decades, the use of securities in various countries' capital markets has expanded and has become an essential part of the economic system supplying the capital need for investors and other institutions. This study aims to analyze the effect of securities used to finance banks (securitization) on economic growth. For this purpose, the theoretical analysis method is used in the framework of a Dynamic Stochastic General Equilibrium (DSGE) model. The theoretical model used is based on Frank Ramsey's (1928) economic growth model. To transform this model into a suitable model for research, the shadow banking system and securitization have been added. The model is then simulated using the calibration method and using the real data of the US economy; then, the macroeconomic changes and fluctuations created by bank securities are explained and analyzed. According to the research findings, issuing securities by banks will lead to slower economic growth. Therefore, it is recommended to avoid the use of securitization in banking.

Keywords: Securitization; Banking; Economic Growth; Calibration Method Constructed Financing. (search for similar items in EconPapers)
JEL-codes: C63 E44 G21 (search for similar items in EconPapers)
Date: 2021
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