Using an international panel of 104 countries over the period 1995–2012, 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 as the results of 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 aimed at reviving securitization markets, as they indicate that the impact of securitization crucially depends on the underlying collateral

Additional Metadata
Keywords Securitization market, Household securitization, Business securitization, Economic growth
JEL Financial Markets; Saving and Capital Investment (jel O16), Economic Growth and Aggregate Productivity: General (jel O40), Financial Crises (jel G01), Banks; Other Depository Institutions; Mortgages (jel G21)
Persistent URL hdl.handle.net/1765/115286
Journal Journal of Financial Stability
Citation
Bertay, A.C, Gong, D, & Wagner, W.B. (2017). Securitization and economic activity: The credit composition channel. Journal of Financial Stability, 28. Retrieved from http://hdl.handle.net/1765/115286