The explosive growth of the ABCP market between 2004 and 2007: A “search for yield” story

Article


Lysandrou, Photis and Shabani, M. 2018. The explosive growth of the ABCP market between 2004 and 2007: A “search for yield” story. Journal of Post Keynesian Economics. 41 (4), pp. 526-546. https://doi.org/10.1080/01603477.2018.1494504
AuthorsLysandrou, Photis and Shabani, M.
Abstract

The years immediately preceding the financial crisis of 2007 witnessed an explosive growth in the supplies both of the long-term securities issued by the shadow banking entities, the asset-backed securities (ABSs) and collateralized debt obligations (CDOs), and of the short-term securities issued by these entities, notably asset-backed commercial paper (ABCP). Although there is now some acknowledgment that the search for yield was the major driver of ABS and CDO growth in the United States, the same is not true of the U.S. ABCP market where other factors such as regulatory arbitrage on the part of banks or the safety and liquidity concerns of institutional investors are seen as having been the more important growth driving force. This article argues that the search for yield did play a crucial role in U.S. ABCP growth between 2004 and 2007. To back up this argument, the article points to four variables that were closely correlated with this growth: the federal funds rate; U.S. money market mutual funds asset holdings; the change in the geographical breakdown of the institutions supplying ABCP; and, finally, the change in the program breakdown of the ABCP market.

JournalJournal of Post Keynesian Economics
Journal citation41 (4), pp. 526-546
ISSN0160-3477
Year2018
PublisherTaylor & Francis
Accepted author manuscript
License
Digital Object Identifier (DOI)https://doi.org/10.1080/01603477.2018.1494504
Web address (URL)https://doi.org/10.1080/01603477.2018.1494504
Publication dates
Online05 Oct 2018
Publication process dates
Deposited22 Oct 2018
Accepted08 Jun 2018
Accepted08 Jun 2018
Copyright information© 2018 Taylor & Francis. This is an Accepted Manuscript of an article published by Taylor & Francis in Journal of Post Keynesian Economics on 05/10/2018, available online: http://www.tandfonline.com/10.1080/01603477.2018.1494504.
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