Securitisation can dampen business cycles, paper finds
Impact of securitisation depends on who buys end products
Securitisation can help stabilise the economy if the end products are bought by "non-financial agents" instead of banks, a working paper published by Sveriges Riksbank contends.
In Subprime Borrowers, Securitization and the Transmission of Business Cycles, Anna Grodecka finds US output would have dropped "by only about a third" and house prices by half of what they did in the crisis, if subprime mortgage-backed securities (MBSs) were bought by agents other than banks.
When the MBSs remain in the
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