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

Andrew Fieldhouse, Karel Mertens, Morten O. Ravn

NBER Working Paper No. 23154
Issued in February 2017, Revised in July 2017
NBER Program(s):Economic Fluctuations and Growth, Monetary Economics

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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w23154

Published: Andrew J Fieldhouse & Karel Mertens & Morten O Ravn, 2018. "The Macroeconomic Effects of Government Asset Purchases: Evidence from Postwar U.S. Housing Credit Policy*," The Quarterly Journal of Economics, vol 133(3), pages 1503-1560.

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