Rationing, Mortgage Demand and the Impact of Financial Deregulation

David Leece

Oxford Bulletin of Economics and Statistics, 1995, vol. 57, issue 1, 43-66

Abstract: The paper uses Family Expenditure Survey data to estimate a reduced form, cross-section model, of mortgage demand. A double hurdle model is estimated which takes account of potential mortgage rationing. The model contrasts with the usual limited dependent variable model (Tobit) where zero values for purchases are observed and treated as equilibrium observations. The empirical specification allows for the deregulation of financial services in the 1980s, and tests for the impact of this on mortgage demand. The null hypothesis that capital markets are perfect and that rationing was not a binding constraint over the sample under study was rejected. The research seeks to better understand the impact of credit rationing upon household behavior. Copyright 1995 by Blackwell Publishing Ltd

Date: 1995
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