Current interpretations of financial crisis are rooted on the conviction that banks are always prone to moral hazard and monetary policy has to intervene to avoid bubbles and the subsequent failure . This paper suggests that financial market’s instability derives from the interaction between monetary policy, non bank financial intermediation and securitization process. Following low interest rates policy, profitability falls and securitization offers an opportunity to increase net interest margin. Unfortunately securitization process raise asset prices of investment grade bonds, squeezes returns and risk premium. So non bank financial intermediaries began to look for high yield loans and short term liabilities to boost returns. When monetary policy tightens, yield curve inverted and returns disappear; asset prices deflation begins, risk premium increases and financial crisis follows

politica monetaria, finanza strutturata e mercati finanziari / G. Pizzutto. - [s.l] : Department of Economics in Milan university, 2010 Dec 15.

politica monetaria, finanza strutturata e mercati finanziari

G. Pizzutto
Primo
2010

Abstract

Current interpretations of financial crisis are rooted on the conviction that banks are always prone to moral hazard and monetary policy has to intervene to avoid bubbles and the subsequent failure . This paper suggests that financial market’s instability derives from the interaction between monetary policy, non bank financial intermediation and securitization process. Following low interest rates policy, profitability falls and securitization offers an opportunity to increase net interest margin. Unfortunately securitization process raise asset prices of investment grade bonds, squeezes returns and risk premium. So non bank financial intermediaries began to look for high yield loans and short term liabilities to boost returns. When monetary policy tightens, yield curve inverted and returns disappear; asset prices deflation begins, risk premium increases and financial crisis follows
15-dic-2010
Financial crisis ; Monetary policy ; Structured finance ; Financial instability
Settore SECS-P/02 - Politica Economica
Working Paper
politica monetaria, finanza strutturata e mercati finanziari / G. Pizzutto. - [s.l] : Department of Economics in Milan university, 2010 Dec 15.
File in questo prodotto:
File Dimensione Formato  
Pizzuttopaper2010politicamonetariafinanzastrutturataeinstabilitàfinanziaria.pdf

accesso aperto

Tipologia: Pre-print (manoscritto inviato all'editore)
Dimensione 260.55 kB
Formato Adobe PDF
260.55 kB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/149816
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact