Publication Type
Working Paper
Version
publishedVersion
Publication Date
3-2009
Abstract
This paper provides a conceptual basis for the price discovery potential for tradable market instruments and specifically the development of mortgage securitization in Asia and the potential dangers of such markets. Nonetheless we argue for the potential importance of securitization in Asia because of its possible role in increasing transparency of the financial sector of Asian economies. We put forth a model explaining how misaligned incentives can lead to bank generated real estate crashes and macroeconomic instability, with or without securitization under certain circumstances. We examine the banking sector’s performance in Asia compared to securitized real estate returns, to provide evidence on the contribution of misaligned incentives in the past. We discuss how the addition of liquid MBS could help to inoculate markets from the shocks arising from bank-financed mortgage lending. We conclude with a brief discussion of current MBS markets in Asia.
Discipline
Asian Studies | Finance | Macroeconomics
Research Areas
Macroeconomics
First Page
1
Last Page
33
Publisher
SMU Economics and Statistics Working Paper Series, No. 07-2009
City or Country
Singapore
Citation
GREEN, Richard; MARIANO, Roberto S.; PAVLOV, Andrey; and WACHTER, Susan.
Misaligned Incentives and Mortgage Lending in Asia. (2009). 1-33.
Available at: https://ink.library.smu.edu.sg/soe_research/1140
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Included in
Asian Studies Commons, Finance Commons, Macroeconomics Commons
Comments
Published in Financial Sector Development in the Pacific Rim, 2009, Chicago: University of Chicago Press. pp. 95-111. ISBN 9780226386843