The Systemic Risk of Corporate Credit Securitization Revisited
Benjamin Lojak () and
Thomas Theobald ()
Additional contact information
Benjamin Lojak: University Bamberg
No 204-2020, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute
We develop a stock-flow-consistent macroeconomic model with an agent-based focus on corporate credit markets, including a securitization process. Against the background of increased corporate indebtedness, our interest is in quantifying contagion effects that endogenously arise from corporate defaults in a securitized credit portfolio. We calibrate the model to the U.S., where corporate credit securitization has been re-intensified in recent years. Simulations deliver adverse medium- to long-term effects as soon as the share of securitized loans in total new loans economy-wide approaches 10%. Securitization activities above this threshold lead to significant welfare losses from the medium-term onwards. Two transmission channels are conceivable. A collapsing special purpose vehicle (SPV) either causes distortions in the banking sector or increases liquidity constraints that ultimately dampen households' consumption due to their financial investment in the securitized tranches. A more concentrated banking sector reinforces the adverse shock of a liquidation of the SPV. In contrast, a faster and better-equipped bank rescue mechanism in the form of levies within the banking sector helps to contain the consequences of a SPV collapse.
Keywords: securitization; systemic risk; agent-based; stock-flow consistent (search for similar items in EconPapers)
JEL-codes: E03 G21 G23 (search for similar items in EconPapers)
Pages: 50 pages
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.boeckler.de/pdf/p_imk_wp_204_2020.pdf [301 Moved Permanently]--> https://www.boeckler.de/pdf/p_imk_wp_204_2020.pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:204-2020
Access Statistics for this paper
More papers in IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute Contact information at EDIRC.
Bibliographic data for series maintained by Sabine Nemitz ().