Mortgage loan securitization and personal consumption smoothening

Journal of Economics and Finance - Tập 41 - Trang 100-115 - 2015
Jenny Gu1, Rodrigo J. Hernandez2, Pu Liu3, Yingying Shao4
1College of Business, University of Dallas, Dallas, USA
2Department of Finance, College of Business and Economics, Radford University, Radford, USA
3Department of Finance, Sam M. Walton College of Business, University of Arkansas, Fayetteville, USA
4Department of Finance, College of Business and Economics, Towson University, Towson, USA

Tóm tắt

In this paper we examine the extent to which personal consumptions are sheltered from state-specific economic shocks because of banks’ mortgage loan securitizations. We posit that securitization contributes to personal consumption smoothening due to securitizations’ positive effect on banks’ credit supply, which reduces consumers’ consumption constraints during economic shocks. Using data for U. S. banks’ mortgage loan securitizations from 1989 to 2008, we show that personal consumption smoothening is positively related to securitization. The finding of a significant relationship between loan securitizations and consumption smoothening contributes to the continuing debate on the role of financial innovation in real economy.

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Journal of Economics and Finance

Tập 41

100-115

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