This paper estimates an empirical model of the choice between adjustable- and fixe d-rate mortgages using a large national database compiled by the Nat ional Association of Realtors. The explanatory variables in the probi t choice equation include borrower characteristics, regional dummies, the FRM rate, and the FRM-ARM rate differential. Since the intrerest rate on the mortgage not chosen is unobserved, this rate must be est imated in a way that eliminates selectivity bias. Simulation of the e stimated choice equation provides insight into the origin of the ARM revolution. Copyright 1988 by MIT Press.
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Volume (Year): 70 (1988) Issue (Month): 1 (February) Pages: 93-102 Download reference. The following formats are available: HTML
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