Template-Type: ReDIF-Paper 1.0
Author-Name: Gazi I Kara
Author-X-Name-First: Gazi I
Author-X-Name-Last: Kara
Author-Name: Youngsuk Yook
Author-X-Name-First: Youngsuk 
Author-X-Name-Last: Yook
Title: Policy Uncertainty and Bank Mortgage Credit
Abstract: 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.
Length: 50 pages
Creation-Date: 2019-10
File-URL: https://www.bis.org/publ/work820.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work820.htm
File-Format: text/html
Number: 820
Classification-JEL: G21, G28
Keywords: Bank Mortgage Credit, Housing Market, Policy Uncertainty, Gubernatorial Elections
Handle: RePEc:bis:biswps:820