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The Macroeconomic Effects of Government Asset Purchases: Evidence from Postwar U.S. Housing Credit Policy

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  • Andrew J 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 also influence prices in other asset markets, stimulate residential investment, and expand homeownership. We compare these effects to those of conventional monetary policy shocks, and we provide evidence on the interactions between housing credit and monetary policies.

Suggested Citation

  • 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, President and Fellows of Harvard College, vol. 133(3), pages 1503-1560.
    • Handle: RePEc:oup:qjecon:v:133:y:2018:i:3:p:1503-1560.
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    File URL: http://hdl.handle.net/10.1093/qje/qjy002
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    More about this item

    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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