Shocks to Bank Lending, Risk-Taking, Securitization, and Their Role for U.S. Business Cycle Fluctuations

G. Peersman, W.B. Wagner

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Abstract

Abstract: Shocks to bank lending, risk-taking and securitization activities that are orthogonal to real economy and monetary policy innovations account for more than 30 percent of U.S. output variation. The dynamic effects, however, depend on the type of shock. Expansionary securitization shocks lead to a permanent rise in real GDP and a fall in inflation. Bank lending and risktaking shocks, in contrast, have only a temporary effect on real GDP and tend to lead to a (moderate) rise in the price level. Furthermore, there is evidence for a strong search-for-yield effect on the side of investors in the transmission mechanism of monetary policy. These effects are estimated with a structural VAR model, where the shocks are identified using a model of bank risk-taking and securitization.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages43
Volume2014-019
Publication statusPublished - 2014

Publication series

NameCentER Discussion Paper
Volume2014-019

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Keywords

  • Bank lending
  • risk-taking
  • securitization
  • SVARs

Cite this

Peersman, G., & Wagner, W. B. (2014). Shocks to Bank Lending, Risk-Taking, Securitization, and Their Role for U.S. Business Cycle Fluctuations. (CentER Discussion Paper; Vol. 2014-019). Tilburg: Economics.