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Misaligned Incentives and Mortgage Lending in Asia

In: Financial Sector Development in the Pacific Rim

Author

Listed:
  • Richard Green
  • Roberto Mariano
  • Andrey Pavlov
  • Susan Wachter

Abstract

This paper provides a conceptual basis for the price discovery potential for tradable market instruments and specifically the development of mortgage securitization in Asia and the potential dangers of such markets. Nonetheless we argue for the potential importance of securitization in Asia because of its possible role in increasing transparency of the financial sector of Asian economies. We put forth a model explaining how misaligned incentives can lead to bank generated real estate crashes and macroeconomic instability, with or without securitization under certain circumstances. We examine the banking sectors performance in Asia compared to securitized real estate returns, to provide evidence on the contribution of misaligned incentives in the past. We discuss how the addition of liquid MBS could help to inoculate markets from the shocks arising from bank-financed mortgage lending. We conclude with a brief discussion of current MBS markets in Asia.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Richard Green & Roberto Mariano & Andrey Pavlov & Susan Wachter, 2009. "Misaligned Incentives and Mortgage Lending in Asia," NBER Chapters, in: Financial Sector Development in the Pacific Rim, pages 95-111, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:0416
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    File URL: http://www.nber.org/chapters/c0416.pdf
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    Cited by:

    1. Susan M. Wachter, 1975. "Comment on "Housing Policy, Mortgage Policy, and the Federal Housing Administration"," NBER Chapters, in: Measuring and Managing Federal Financial Risk, pages 125-130, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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