The impact of credit rationing on the real sector: a study of the effect of mortgage rates and terms on housing starts |
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| Authors: | Stanley R Stansell A Cameron Mitchell |
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| Institution: | 1. Department of Economics and Finance, School of Business , University of Mississippi, University , Mississippi , 38677 , USA;2. Department of Management Systems and Strategy , University of Houston , University Park, Texas , 77004 , USA |
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| Abstract: | Various studies of the impact of credit rationing on the housing sector have examined its effect on mortgage terms and flows. If credit rationing has a significant effect on the economy, it must affect the real sector, i.e. housing starts. This paper examines the causal relationships between six different variables which describe mortgage rates and terms and single family housing starts. Two different types of tests for economic causality are used. The results indicate that neither credit rationing nor mortgage rates affect housing starts for the period 1963–1980. There is some evidence that housing prices have a causal relationship to housing starts, possibly reflecting speculative motives. On balance, the results are consistent with the rational expectations theory. |
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