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Securitization, housing market and banking sector behavior in a stock-flow consistent model

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  • Fontana, Olimpia
  • Godin, Antoine

Abstract

This paper focuses on the different balance sheet management behavior of private banks and worker households, when assets are traded in the market. The authors take into consideration the securitization process, through which mortgage loans to households are converted into tradable securities which are held by investment banks in order to make profits. The demand for deposits by speculative households and realized capital gains on selling of mortgage-backed securities in the secondary market produce an inflation balloon in security markets, even though the authors apply the Basel III agreements to private banking behavior.

Suggested Citation

  • Fontana, Olimpia & Godin, Antoine, 2013. "Securitization, housing market and banking sector behavior in a stock-flow consistent model," Economics Discussion Papers 2013-13, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201313
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    References listed on IDEAS

    as
    1. Edwin Le Heron & Tarik Mouakil, 2008. "A Post-Keynesian Stock-Flow Consistent Model For Dynamic Analysis Of Monetary Policy Shock On Banking Behaviour," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 405-440, July.
    2. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115.
    3. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
    4. Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 77-100, Winter.
    5. James Crotty, 2009. "Structural causes of the global financial crisis: a critical assessment of the 'new financial architecture'," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 563-580, July.
    6. Tobin, James, 1982. "Money and Finance in the Macroeconomic Process," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(2), pages 171-204, May.
    7. Luiz Carlos Bresser-Pereira, 2010. "The global financial crisis and a new capitalism?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(4), pages 499-534, July.
    8. Adrian, Tobias & Shin, Hyun Song, 2010. "Liquidity and leverage," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 418-437, July.
    9. Turnovsky,Stephen J., 1977. "Macroeconomic Analysis and Stabilization Policy," Cambridge Books, Cambridge University Press, number 9780521291873.
    10. HyunSong Shin, 2009. "Securitisation and Financial Stability," Economic Journal, Royal Economic Society, vol. 119(536), pages 309-332, March.
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    Citations

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    Cited by:

    1. Florian Botte & Laurent Cordonnier & Thomas Dallery & Vincent Duwicquet & Jordan Melmies & Franck Van de Velde, 2017. "The cost of capital: between losses and diversion of wealth
      [Le coût du capital : entre pertes et détournement de richesses]
      ," Working Papers hal-01711157, HAL.
    2. Mazzocchetti, Andrea & Raberto, Marco & Teglio, Andrea & Cincotti, Silvano, 2017. "Securitisation and Business Cycle: An Agent-Based Perspective," MPRA Paper 76760, University Library of Munich, Germany.

    More about this item

    Keywords

    securitization; stock-flow consistent modelling; active banking;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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