Credit risk transfers and the macroeconomy : [This Draft: September 2010]

  • The recent financial crisis has highlighted the limits of the “originate to distribute” model of banking, but its nexus with the macroeconomy and monetary policy remains unexplored. I build a DSGE model with banks (along the lines of Holmström and Tirole [28] and Parlour and Plantin [39] and examine its properties with and without active secondary markets for credit risk transfer. The possibility of transferring credit reduces the impact of liquidity shocks on bank balance sheets, but also reduces the bank incentive to monitor. As a result, secondary markets allow to release bank capital and exacerbate the effect of productivity and other macroeconomic shocks on output and inflation. By offering a possibility of capital recycling and by reducing bank monitoring, secondary credit markets in general equilibrium allow banks to take on more risk. Keywords: Credit Risk Transfer , Dual Moral Hazard , Monetary Policy , Liquidity , Welfare JEL Classification: E3, E5, G3 First Draft: December 2009, This Draft: September 2010

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Author:Ester FaiaGND
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2010,26
Series (Serial Number):CFS working paper series (2010, 26)
Document Type:Working Paper
Year of Completion:2010
Year of first Publication:2010
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2010/12/15
Tag:Credit Risk Transfer; Dual Moral Hazard; Liquidity; Monetary Policy; Welfare
GND Keyword:Kreditrisiko; Risikoverteilung; Bank; Kreditwesen; Allgemeines Gleichgewichtsmodell
Issue:Draft: September 2010
Page Number:43
First Draft: December 2009 ; This Draft: September 2010
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht