Pub Date : 2019-12-31DOI: 10.5772/intechopen.90728
S. Senarath
Asset securitization has been identified as an alchemy that ‘really’ works. Asset securitization yields a number of benefits to a financial system inter alia by reducing overall interest rates, enhancing liquidity in the banking sector and reducing intermediary costs. Yet, the recent global financial crisis (GFC) questioned the very existence of asset securitization. However, post-GFC literature is not hesitant to identify a list of causes that may have facilitated the GFC including subprime lending, executive compensation, de-regulation, etc. Adopting a lexonomic approach, this discussion deviates from the traditional approach by focusing on identifying political and institutional factors behind the GFC. This chapter will investigate U.S political economic decision and then U.S institutional setup that may have facilitated the stage for a GFC.
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Pub Date : 2019-12-27DOI: 10.5772/intechopen.90729
Ryo Hasumi, Hirokuni Iiboshi, T. Matsumae, Shin’ichi Nishiyama
We incorporate two structural shocks associated with balance sheets of both the financial and nonfinancial firms in a medium scale New Keynesian dynamic stochastic general equilibrium (DSGE) model. The structural shocks in the model are assumed to possess stochastic volatilities with a leverage effect. Then, we estimated the model using a data-rich estimation method and utilized up to 40 macroeconomic time series. We found the following three pieces of empirical evidence in the Great Recession (Dec. 2007–Jun. 2009) worsened further by the collapse of Lehman Brothers in September 2008. First, the net-worth shock of financial firms had gradually declined prior to a huge decrease of net-worth of nonfinancial firms. Second, the net worth shock of nonfinancial firms accounted for large weight of the business cycles after the Great Recession, in terms of the data-rich approach with the SV of structural shocks, unlike the standard DSGE model. Third, the Troubled Asset Relief Program would have immediately worked to improve balance sheets of financial institutions, although it would not have stopped worsening those of the corporate sector for a while.
{"title":"Source of the Great Recession","authors":"Ryo Hasumi, Hirokuni Iiboshi, T. Matsumae, Shin’ichi Nishiyama","doi":"10.5772/intechopen.90729","DOIUrl":"https://doi.org/10.5772/intechopen.90729","url":null,"abstract":"We incorporate two structural shocks associated with balance sheets of both the financial and nonfinancial firms in a medium scale New Keynesian dynamic stochastic general equilibrium (DSGE) model. The structural shocks in the model are assumed to possess stochastic volatilities with a leverage effect. Then, we estimated the model using a data-rich estimation method and utilized up to 40 macroeconomic time series. We found the following three pieces of empirical evidence in the Great Recession (Dec. 2007–Jun. 2009) worsened further by the collapse of Lehman Brothers in September 2008. First, the net-worth shock of financial firms had gradually declined prior to a huge decrease of net-worth of nonfinancial firms. Second, the net worth shock of nonfinancial firms accounted for large weight of the business cycles after the Great Recession, in terms of the data-rich approach with the SV of structural shocks, unlike the standard DSGE model. Third, the Troubled Asset Relief Program would have immediately worked to improve balance sheets of financial institutions, although it would not have stopped worsening those of the corporate sector for a while.","PeriodicalId":120957,"journal":{"name":"Financial Crises - A Selection of Readings","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127873815","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-10-16DOI: 10.5772/intechopen.89931
Doğuş Emin
This chapter studies the impacts of short-term interest rates of United States and emerging markets risk premia as external factors on Turkish short-term interest rates and daily exchange rates during the period of January 2011–December 2018. Following Edwards and Borensztein et al., we construct a vector autoregressive (VAR) model with the domestic short-term interest rates, exchange rate against the US Dollar, the US interest rates and iShares MSCI emerging markets ETF. Hereby, we intend to shed some light on the reaction of Turkish interest rates and exchange rates to the short-term US interest rates and emerging markets instability. As other emerging countries, Turkey is rather economically and politically unstable country. Even a little political development may cause a serious volatility in the market. For that reason, in this study we specifically examine the periods that are known as politically stressed times and tranquil periods separately to see how external factors’ behaviors change during shock periods.
{"title":"External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil Periods versus Politically Stressed Times","authors":"Doğuş Emin","doi":"10.5772/intechopen.89931","DOIUrl":"https://doi.org/10.5772/intechopen.89931","url":null,"abstract":"This chapter studies the impacts of short-term interest rates of United States and emerging markets risk premia as external factors on Turkish short-term interest rates and daily exchange rates during the period of January 2011–December 2018. Following Edwards and Borensztein et al., we construct a vector autoregressive (VAR) model with the domestic short-term interest rates, exchange rate against the US Dollar, the US interest rates and iShares MSCI emerging markets ETF. Hereby, we intend to shed some light on the reaction of Turkish interest rates and exchange rates to the short-term US interest rates and emerging markets instability. As other emerging countries, Turkey is rather economically and politically unstable country. Even a little political development may cause a serious volatility in the market. For that reason, in this study we specifically examine the periods that are known as politically stressed times and tranquil periods separately to see how external factors’ behaviors change during shock periods.","PeriodicalId":120957,"journal":{"name":"Financial Crises - A Selection of Readings","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114394167","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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