Economic volatility and financial markets: the case of mortgage-backed securities
The volatility of aggregate economic activity in the United States decreased markedly in the mid eighties. The decrease involved several components of GDP and has been linked to a more stable economic environment, identified by smaller shocks and more effective policy, and a diverse set of innovations related to inventory management as well as financial markets. We document a negative relation between the volatility of GDP and some of its components and one such financial development: the emergence of mortgage-backed securities. We also document that this relationship changed sign, from negative to positive, in the early 2000's.
Year of publication: |
2013
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Authors: | Antinolfi, Gaetano ; Brunetti, Celso |
Institutions: | Federal Reserve Board (Board of Governors of the Federal Reserve System) |
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