Policy Uncertainty and Bank Mortgage Credit
Gazi Kara () and
No 820, BIS Working Papers from Bank for International Settlements
We show that banks reduce the supply of jumbo mortgage loans when policy uncertainty increases, as measured by the timing of US gubernatorial elections in banks' headquarter states. We use high-frequency, geographically granular loan-level data to address an identification problem arising from the changing demand for loans: (1) The data allow for a difference-in-difference specification and for state/time (quarter) fixed effects; (2) we observe banks reduce lending not just in their home states but also outside their home states when their home states hold elections; (3) we observe important cross-sectional differences in the way banks with different characteristics respond to policy uncertainty. Overall, the findings suggest that policy uncertainty has a real effect on residential housing markets through banks' credit supply decisions and that it can spill over across states through lending by banks serving multiple states.
Keywords: Bank Mortgage Credit; Housing Market; Policy Uncertainty; Gubernatorial Elections (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 50 pages
New Economics Papers: this item is included in nep-ban and nep-ure
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Working Paper: Policy Uncertainty and Bank Mortgage Credit (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:820
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