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A Quest For Unfettered Credit: How Monetary Policy Drives Credit Risk Transfer Of Structured Finance Products

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  • Mari L. Robertson

Abstract

This study examines the effects of monetary policy contractions on bank loans to households and firms and instruments in three different credit risk transfer (CRT) capital markets over two separate time periods (1995–2006 and 2007–2015). The findings show that in both periods, banks decrease business lending but increase lending to consumers through a combination of mortgage, auto, credit card, and student loans from more liquidity produced by consumer‐related CRT activity. Additional results reveal relative CRT movements toward securitized mortgages from bank mortgage debt over both periods and toward securitized and insured business loans from bank business debt in the latter period, which suggest vulnerabilities among interconnected credit markets. (JEL E44, E51, G21, G23)

Suggested Citation

  • Mari L. Robertson, 2019. "A Quest For Unfettered Credit: How Monetary Policy Drives Credit Risk Transfer Of Structured Finance Products," Contemporary Economic Policy, Western Economic Association International, vol. 37(1), pages 138-155, January.
  • Handle: RePEc:bla:coecpo:v:37:y:2019:i:1:p:138-155
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    File URL: https://doi.org/10.1111/coep.12264
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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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