A Disequilibrium Model of Savings and Loan Associations

Authors

  • GARY SMITH,

  • WILLIAM BRAINARD

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    • Pomona College and Yale University. The research described in this paper was supported by a grant from the National Science Foundation. Dwight M. Jaffee and Stuart I. Greenbaum provided very detailed and helpful suggestions.

ABSTRACT

This paper discusses the consistent specification and estimation of asset demand equations in a disequilibrium model of financial markets. We estimate the effective asset demands of savings and loan associations, allowing for rationing in the mortgage market. These disequilibrium estimates are not very different from the estimates of notional demands with no rationing assumed. Savings and loans seem to be least affected by excess demand situations in that they are apparently not reluctant to raise mortgage rates and/or to ration borrowers.

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