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The Likely Impact of Increases in Deposit Rate Ceilings on Thrift Earnings and Housing Construction

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  • Patric H. Hendershott

Abstract

Simulations of a seventy‐equation econometric model are run in an attempt to deduce the likely impact of increases in deposit rate ceilings on financial markets, the earnings of depository institutions, and the composition of nonfinancial investment. The analysis suggests that the effect of binding rate ceilings during the 1973–75 period was to raise home mortgage rates (by about 30 basis points), accentuate the downturn in single family housing starts (by about 40,000 per year), and maintain earnings at depository institutions. Without the ceilings thrift earnings would have been about a billion dollars less per year. However, this loss might well be more than compensated for by greater thrift earnings in subsequent years and by lower noninterest expenses.

Suggested Citation

  • Patric H. Hendershott, 1979. "The Likely Impact of Increases in Deposit Rate Ceilings on Thrift Earnings and Housing Construction," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 7(2), pages 177-189, June.
    • Handle: RePEc:bla:reesec:v:7:y:1979:i:2:p:177-189
    DOI: 10.1111/1540-6229.t01-2-00201
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