Jenny Gu, Satish & Yasmin Gupta College of Business
"Mortgage Loan Securitization and Personal Consumption Smoothening"
In the Author's Words
In this paper we examine the extent to which personal consumptions are sheltered from
state-specific economic shocks because of banks’ mortgage loan securitizations. We
posit that securitization contributes to personal consumption smoothening due to securitizations’
positive effect on banks’ credit supply, which reduces consumers’ consumption constraints
during economic shocks. Using data for U. S. banks’ mortgage loan securitizations
from 1989 to 2008, we show that personal consumption smoothening is positively related
to securitization. The finding of a significant relationship between loan securitizations
and consumption smoothening contributes to the continuing debate on the role of financial
innovation in real economy.
Gu, J., Hernandez, R., Liu, P., & Shao, Y. (2015). Mortgage Loan Securitization and
Personal Consumption Smoothening. Journal of Economics and Finance. “lead article”
in issue.
Faculty Profile: Jenny Gu
