The Macroeconomic Effects of Government Asset Purchases: Evidence from Postwar Us Housing Credit Policy

87 Pages Posted: 13 Feb 2017 Last revised: 21 Feb 2017

See all articles by Andrew Fieldhouse

Andrew Fieldhouse

Cornell University - Department of Economics

Karel Mertens

Federal Reserve Banks - Federal Reserve Bank of Dallas

Morten O. Ravn

University College London

Date Written: February 2017

Abstract

We document the portfolio activity of federal housing agencies and provide evidence on its impact on mortgage markets and the economy. Through a narrative analysis, we identify historical policy changes leading to expansions or contractions in agency mortgage holdings. Based on those regulatory events that we classify as unrelated to short-run cyclical or credit market shocks, we find that an increase in mortgage purchases by the agencies boosts mortgage lending, in particular refinancing, and lowers mortgage rates. Agency purchases influence prices in other asset markets, stimulate residential investment and expand homeownership. Using information in GSE stock prices to construct an alternative instrument for agency purchasing activity yields very similar results as our benchmark narrative identification approach.

Suggested Citation

Fieldhouse, Andrew and Mertens, Karel and Ravn, Morten O., The Macroeconomic Effects of Government Asset Purchases: Evidence from Postwar Us Housing Credit Policy (February 2017). NBER Working Paper No. w23154, Available at SSRN: https://ssrn.com/abstract=2915981

Andrew Fieldhouse (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Karel Mertens

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Morten O. Ravn

University College London ( email )

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