Competitive housing markets fostered risk taking before crisis – IMF research
In areas with higher price volatility institutions lowered lending standards
Higher price volatility in the US incentivised banks to engage in higher risk taking in the years leading up to the financial crisis, says a research paper published by the International Monetary Fund on July 6.
In Bank Competition, Risk Taking, and their Consequences: Evidence from the US Mortgage and Labor Markets, Alan Xiaochen Feng says: “Banks in US counties with a competitive mortgage market lowered lending standards by twice as much as those with concentrated markets between 2000 and
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