Does Securitisation Make Monetary Policy Less Effective?
We re-examine the role of monetary policy and its transmission mechanism through the credit channel while focusing on securitisation. We empirically investigate the interactions between securitisation activities and monetary policy using data from 1995 to 2015 for a panel of 10 European countries. We employ a panel VAR model, and estimate it using a GMM system. Our findings indicate that a contractionary monetary policy shock immediately increases securitisation activities and decreases the growth rate of traditional (non-securitised) loans. The evidence supports the argument that merely raising interest rate is not sufficient to control credit booms, but, on the contrary, may induce credit intermediation, which in turn can increase system risk. Any modern central bank should re-examine and redefine its role as a ‘banker’s bank’ taking into consideration the future developments in shadow banking and financial innovation in order to ensure financial stability.
Other Information
Published in: Review of Political Economy
License: http://creativecommons.org/licenses/by-nc-nd/4.0/
See article on publisher's website: https://dx.doi.org/10.1080/09538259.2021.1882190
Funding
Open Access funding provided by the Qatar National Library.
History
Language
- English
Publisher
RoutledgePublication Year
- 2021
License statement
This Item is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.Institution affiliated with
- Qatar University
- College of Business and Economics - QU