Balance Sheet Economics Of The Subprime Mortgage Crisis
As Copeland (1947; 1952) demonstrated with his money-flows accounts more than half a century ago, the balance sheets of economic entities are closely interrelated through a lender-borrower relationship. This paper is an attempt to describe the US subprime mortgage crisis in the framework of 'balance sheet economics', which was originally proposed by Stone (1966) and Klein (1977; 1983). Since it is almost impossible to collect all the balance sheets of economic entities, we use flow-of-funds accounts instead to simulate the negative consequences resulting from home mortgage delinquencies. We show that the pass-through sequence converges when the original delinquency is made up by loss of net worth in any of the economic entities. Most of the eventual loss is incurred by 'Households and Nonprofit Organizations' and 'Rest of the World'. A portion of pass-through loss is eventually incurred by foreign countries with excess external assets, such as Japan, Ireland, etc.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 23 (2011)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CESR20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CESR20|
When requesting a correction, please mention this item's handle: RePEc:taf:ecsysr:v:23:y:2011:i:1:p:1-25. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst)
If references are entirely missing, you can add them using this form.