Does credit rationing affect residential investment? Déjà vu all over again

This paper develops an empirical model to examine the impacts of credit rationing on residential investment for the 1960–1984 period. Our statistical results strongly support the position that noninterest rate variables affect mortgage activity and housing construction. Though we find a structural change in the housing construction and mortgage markets in the early 1980s, probably attributable to capital market integration and financial institutional deregulation, noninterest rate terms continue to matter. In other words, credit rationing continues to be an allocative device in the housing and mortgage markets.Earlier versions of this article have been presented at the Western Economic Association Conference, Los Angeles, June 1988; the Tenth Pacific Regional Science Conference, Pusan, Korea, July 1987; the AREUEA Annual Meetings New York City, December 1985; and the American Finance Association Annual Meetings, San Francisco, December 1983.