The Demand for Federal Home Loan. Bank Advances by Thrift Institutions: Some Recent Evidence |
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| Authors: | Elizabeth Mays Edward J DeMarco |
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| Institution: | Economist, Office of Thrift Supervision, Department of the Treasury, 801 17th Street, NW, Washington, DC 20006.;Economist, U.S. General Accounting Office, 441 G. Street, NW, Washington, DC 20548. |
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| Abstract: | This paper develops a model of the demand for Federal Home Loan Bank (FHLB) advances by thrift institutions. It expands on a model developed in Kent 1983] by accounting for net worth in the balance sheet constraint and for borrowing in excess of the "advances limit." The demand equation is estimated using pooled time-series and cross-sectional data for individual thrift institutions over the period 1979–1986. The results indicate that in addition to the traditional use of advances as a source of liquidity, advances are a particularly attractive source of funds for poorly capitalized institutions. Further, thrifts' demand for advances is responsive to the price of advances, mortgage interest rates, the dividend rate on FHLB stock, and rates on substitute sources of funds. |
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