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

Author

Listed:
  • Andrew Fieldhouse

    (Cornell University)

  • Karel Mertens

    () (Centre for Economic Policy Research (CEPR)
    Department of Economics Cornell University
    National Bureau of Economic Research (NBER))

  • Morten O. Ravn

    () (Centre for Economic Policy Research (CEPR)
    Centre for Macroeconomics (CFM)
    Department of Economics University College London (UCL))

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 and lowers mortgage rates. Agency purchases influence prices in other asset markets and stimulate residential investment. 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

  • Andrew Fieldhouse & Karel Mertens & Morten O. Ravn, 2017. "The Macroeconomic Effects of Government Asset Purchases: Evidence from Postwar US Housing Credit Policy," Discussion Papers 1707, Centre for Macroeconomics (CFM).
  • Handle: RePEc:cfm:wpaper:1707
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    References listed on IDEAS

    as
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    Cited by:

    1. Dmitriy Sergeyev & Luigi Iovino, 2017. "Quantitative Easing without Rational Expectations," 2017 Meeting Papers 1387, Society for Economic Dynamics.
    2. Kozlowski, Julian, 2017. "Long-Term Finance and Investment with Frictional Asset Markets," Working Papers 2018-12, Federal Reserve Bank of St. Louis.
    3. Julien Champagne & Rodrigo Sekkel, 2017. "Changes in Monetary Regimes and the Identification of Monetary Policy Shocks: Narrative Evidence from Canada," Staff Working Papers 17-39, Bank of Canada.
    4. Mario Alloza & Pablo Burriel & Javier J. Pérez, 2018. "Fiscal policies in the euro area: revisiting the size of spillovers," Working Papers 1820, Banco de España;Working Papers Homepage.

    More about this item

    Keywords

    Credit Policy; Monetary Policy; Mortgage Credit; Residential Investment; Government Sponsored Enterprises;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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