Conservatorship, quantitative easing, and mortgage spreads: a new multi-equation score-driven model of policy actions

Szabolcs Blazsek, Blazsek Virag and Kobor Adam
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Blazsek Virag: School of Law, University of Leeds, Leeds LS2 9JT, UK
Kobor Adam: Investment Office, New York University, New York NY 10012, USA

Studies in Nonlinear Dynamics & Econometrics, 2023, vol. 27, issue 2, 237-264

Abstract: In this paper, the effects of United States (US) policy actions on mortgage-backed security and mortgage loan spreads are measured, by using data before, during, and after the US subprime mortgage crisis. We study the effects of the following policy actions: (i) the placement of Fannie Mae and Freddie Mac into US Government conservatorship; (ii) the US Federal Reserve quantitative easing (QE) programs. We provide the following contributions to the literature: (i) for a robust measurement of policy effects, a new multi-equation score-driven t-QVARMA (quasi-vector autoregressive moving average) model is used. (ii) In addition to the measurement of the effects of QE, the effects of government conservatorship are also measured in this paper. (iii) Furthermore, the data period of the relevant literature is extended to the period of June 1998 to March 2020.

Keywords: dynamic conditional score (DCS); generalized autoregressive score (GAS); government conservatorship; government-sponsored enterprises (GSEs); mortgage-backed securities (MBSs); quantitative easing (QE) programs (search for similar items in EconPapers)
JEL-codes: C32 C52 E52 E58 G21 G28 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/snde-2021-0066

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