Securitization of subprime credit and the propagation of housing shocks

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dc.contributor.authorYamout, Nadine
dc.contributor.departmentDepartment of Economics
dc.contributor.facultyFaculty of Arts and Sciences (FAS)
dc.contributor.institutionAmerican University of Beirut
dc.date.accessioned2025-01-24T11:23:19Z
dc.date.available2025-01-24T11:23:19Z
dc.date.issued2023
dc.description.abstractThe 2007–2009 global financial crisis which originated in the U.S. subprime mortgage market and then spread to the whole financial system, drew attention to the impact that subprime lending and subprime mortgage securitization can have on the real economy. This paper explores the dynamics of the economy with a subprime mortgage market and the financial innovation in that sector when housing shocks arise. I develop a DSGE model with different types of borrowers and a shadow banking sector that is involved in subprime lending and securitization activities. The model shows that the process of securitizing risky credit amplifies the propagation of housing shocks in the economy through creating a link between the financial sector and the real sector. © 2023 Elsevier Inc.
dc.identifier.doihttps://doi.org/10.1016/j.jeconbus.2023.106127
dc.identifier.eid2-s2.0-85162178194
dc.identifier.urihttp://hdl.handle.net/10938/25695
dc.language.isoen
dc.publisherElsevier Inc.
dc.relation.ispartofJournal of Economics and Business
dc.sourceScopus
dc.subjectBusiness cycle fluctuations
dc.subjectDsge model
dc.subjectFinancial crisis
dc.subjectMortgage securitization
dc.subjectSubprime lending
dc.titleSecuritization of subprime credit and the propagation of housing shocks
dc.typeArticle

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