The Review of Economics and Statistics Vol. 70 No. 1 1988
The Rise and Fall of the Arm: An Econometric Analysis of Mortgage Choice
Abstract
This paper estimates an empirical model of the choice between adjustable- and fixe d-rate mortgages using a large national database compiled by the Nat ional Association of Realtors. The explanatory variables in the probi t choice equation include borrower characteristics, regional dummies, the FRM rate, and the FRM-ARM rate differential. Since the intrerest rate on the mortgage not chosen is unobserved, this rate must be est imated in a way that eliminates selectivity bias. Simulation of the e stimated choice equation provides insight into the origin of the ARM revolution.
- DOI
- 10.2307/1928154
- Volume
- 70
- Issue
- 1
- Pages
- 93
- Sources
- openalex crossref