The rise of non-regulated financial intermediaries in the housing sector and its macroeconomic implications

Arbeitspapier

I examine the impact of non-regulated lenders in the mortgage market using a dynamic stochastic general equilibrium (DSGE) model. My model features two types of financial intermediaries that differ in three ways: (i) only regulated intermediaries face a capital requirement, (ii) non-regulated intermediaries finance themselves by selling securities and cannot accept deposits, and (iii) non-regulated intermediaries face a more elastic demand. This last assumption is based on empirical evidence for Canada revealing that non-regulated intermediaries issue loans at a lower interest rate. My results suggest that the non-regulated sector contributes to stabilize the economy by providing an alternative source of capital when the regulated sector in unable to fulfill the demand for credit. As a result, an economy with a large non-regulated sector experiences a smaller downturn after an adverse financial shock.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Canada Staff Working Paper ; No. 2017-36

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Money and Interest Rates: Forecasting and Simulation: Models and Applications ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Financial Institutions and Services: Government Policy and Regulation
• Subject: Business fluctuations and cycles ; Economic models ; Financial systemregulation and policies ; Housing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Desgagnés, Hélène
• Event: Veröffentlichung
• (who): Bank of Canada
• (where): Ottawa
• (when): 2017

Further information

• DOI: doi:10.34989/swp-2017-36
• Handle: http://hdl.handle.net/10419/197842
• Last update: 10.03.2025, 11:44 AM CET