Fed paper constructs ‘loan frontier’ for mortgages
Method mimics literature on estimating production frontiers
Constructing measures of maximum possible loan origination can shed new light on how credit was allocated before and after the 2008 crisis, a working paper published by the Federal Reserve finds.
Elliot Anenberg, Aurel Hizmo, Edward Kung and Raven Molloy set out a method of constructing a “loan frontier” in the paper, Measuring Mortgage Credit Availability: A Frontier Estimation Approach. The method is based on the literature on production possibility frontiers, using borrower characteristics
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