Balance sheet economics of the subprime mortgage crisis

Masako Tsujimura, Kazusuke Tsujimura

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


As Copeland (1947; 1952) demonstrated with his money-flows accounts more than half a century ago, the balance sheets of economic entities are closely interrelated through a lender-borrower relationship. This paper is an attempt to describe the US subprime mortgage crisis in the framework of 'balance sheet economics', which was originally proposed by Stone (1966) and Klein (1977; 1983). Since it is almost impossible to collect all the balance sheets of economic entities, we use flow-of-funds accounts instead to simulate the negative consequences resulting from home mortgage delinquencies. We show that the pass-through sequence converges when the original delinquency is made up by loss of net worth in any of the economic entities. Most of the eventual loss is incurred by 'Households and Nonprofit Organizations' and 'Rest of the World'. A portion of pass-through loss is eventually incurred by foreign countries with excess external assets, such as Japan, Ireland, etc.

Original languageEnglish
Pages (from-to)1-25
Number of pages25
JournalEconomic Systems Research
Issue number1
Publication statusPublished - 2011 Mar 1


  • Flow-of-funds accounts
  • Lender-borrower relationship
  • Leontief inverse

ASJC Scopus subject areas

  • Economics and Econometrics


Dive into the research topics of 'Balance sheet economics of the subprime mortgage crisis'. Together they form a unique fingerprint.

Cite this