Housing and the Macroeconomy: The Role of Implicit Guarantees for Government-Sponsored Enterprises
نویسندگان
چکیده
This paper studies the macroeconomic effects of implicit government guarantees of Government-Sponsored Enterprises obligations. We construct a model with competitive housing and mortgage markets where the government provides banks with insurance against aggregate shocks to mortgage default risk. We use this model to evaluate aggregate and distributional impacts of this government subsidy to owner-occupied housing. Preliminary findings indicate that the subsidy leads to higher equilibrium housing investment, higher mortgage default rates and lower welfare. The welfare effects of this policy vary substantially across members of the population with different economic characteristics.
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