Working Paper: NBER ID: w15919
Authors: Zhiguo He; In Gu Khang; Arvind Krishnamurthy
Abstract: We measure how securitized assets, including mortgage-backed securities and other asset-backed securities, have shifted across financial institutions over this crisis and how the availability of financing has accommodated such shifts. Sectors dependent on repo financing - in particular, the hedge fund and broker-dealer sector - have reduced asset holdings, while the commercial banking sector, which has had access to more stable funding sources, has increased asset holdings. The banking sector also increased its leverage dramatically over this crisis. These findings are important to understand the role played by the government during the crisis as well as to understand the factors determining asset prices and liquidity during the crisis.
Keywords: financial crisis; balance sheet adjustments; securitized assets; repo financing; government intervention
JEL Codes: E5; G01; G2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hedge funds and broker-dealers reduced their holdings of securitized assets (G24) | Commercial banking sector increased its holdings of securitized assets (G21) |
| Government interventions (E65) | Banking sector's ability to acquire assets (G21) |
| Rise in haircuts in the repo market (E43) | Hedge funds forced to liquidate assets (G33) |
| Financing conditions (G32) | Asset trading decisions during the crisis (G11) |