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| Author: | Haan, W.J.D. Sterk, V. |
| Title: | The myth of financial innovation and the great moderation |
| Journal: | Economic Journal
2011 : JUN, VOL. 121:553 p. 707-739 |
| Index terms: | financial crises financial markets mortgages financial institutions behavioural science |
| Language: | eng |
| Abstract: | Financial innovation is widely believed to be at least partly responsible for the recent financial crisis. At the same time, there are also arguments supporting the view that changes in financial markets, particularly, innovations in consumer credit and home mortgages, played a role in the "great moderation". This paper questions empirical evidence that support this view. Especially the behavior of aggregate home mortgages changed less during the great moderation than is typically believed. A significant change that is done is that monetary tightenings became episodes during which financial institutions other than banks picked up their mortgages holdings. |
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