Securitization and Economic Activity: The Credit Composition Channel

35 Pages Posted: 22 Jun 2015

See all articles by Ata Can Bertay

Ata Can Bertay

World Bank - Development Research Group (DECRG); Tilburg University - European Banking Center

Di Gong

University of International Business and Economics (UIBE) - School of Banking and Finance

Wolf Wagner

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Centre for Economic Policy Research (CEPR)

Date Written: June 2015

Abstract

Using an international panel, we analyze the relationship between country-level securitization and economic activity. Our findings suggest that securitization is negatively related to various proxies of economic activity - even prior to the crisis of 2007-2009. We explain this finding by securitization spurring consumption at the expense of investment and capital formation. Consistent with this, we find that securitization of household loans is negatively associated with economic activity, whereas business securitization displays a weak positive association with it, and that household securitization increases an economy's consumption-investment ratio. Our results inform recent initiatives aiming at reviving securitization markets, as they indicate that the impact of securitization crucially depends on the underlying collateral.

Keywords: business securitization, economic growth, household securitization, securitization

JEL Classification: G01, G21, O16, O40

Suggested Citation

Bertay, Ata Can and Gong, Di and Wagner, Wolf, Securitization and Economic Activity: The Credit Composition Channel (June 2015). CEPR Discussion Paper No. DP10664. Available at SSRN: https://ssrn.com/abstract=2621548

Ata Can Bertay (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
+1 202 458 7253 (Phone)

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Di Gong

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Wolf Wagner

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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