30 Pages Posted: 2 Apr 2010
Date Written: February, 18 2010
We show that since 1994, branching deregulations in the U.S have signi cantly affected the supply of mortgage credit, and ultimately house prices. With deregulation, the number and volume of originated mortgage loans increase, while denial rates fall. But the deregulation has no effect on a placebo sample, formed of mortgage companies that should not be affected by the regulatory change. This sharpens the causal interpretation of our results. Deregulation acts to relax access to mortgage credit, and pushes the demand for house ownership outwards. Interestingly, the fraction of securitized mortgage loans remains unchanged through the process. We fi nd evidence house prices rise with branching deregulation, and particularly in Metropolitan Areas where construction is inelastic for topographic reasons. We document these results in a large sample of counties across the U.S. We also focus on a reduced cross-section formed by counties on each side of a state border, where a regression discontinuity approach is possible. Our conclusions are strengthened.
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