Working Paper: NBER ID: w23154
Authors: Andrew Fieldhouse; Karel Mertens; Morten O. Ravn
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.
Keywords: government asset purchases; housing credit policy; mortgage markets; macroeconomic effects
JEL Codes: E44; E5; G28; R38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Agency mortgage purchases (G21) | Mortgage lending (G21) |
| Agency mortgage purchases (G21) | Refinancing activity (G21) |
| Agency mortgage purchases (G21) | Mortgage rates (G21) |
| Agency mortgage purchases (G21) | Stock of mortgage debt (G21) |
| Agency mortgage purchases (G21) | Residential investment (R31) |
| Agency mortgage purchases (G21) | Homeownership rates (R21) |
| Agency mortgage purchases (G21) | House prices (R31) |
| Agency mortgage purchases (G21) | Unemployment rates (J64) |
| Agency mortgage purchases (G21) | Personal income (D31) |