Measuring potential GSE funding advantages

Brent W. Ambrose, Arthur Warga

Research output: Contribution to journalReview articlepeer-review

19 Scopus citations

Abstract

As the size of government sponsored enterprises (GSE) has grown, attention has focused on the relationship between the federal government and the GSEs, with particular attention focused on estimating the impact of this relationship on GSE debt costs. Quantifying the GSEs' cost advantage is a controversial exexcise with several competing methodologies providing divergent values. Thus, this paper reviews the methods that have been utilized in previous studies and recommends an alternative approach that overcomes many of the criticisms of previous work. By using offering yields on GSE debt, we find that the three housing GSEs enjoyed an average advantage of between 25 and 29 basis points over "AA" banking sector bonds, between 43 and 47 basis points over "A" rated bonds, and between 76 and 80 basis points over "BBB" rated banking issues. We find that our results are robust to both the basic approach taken as well as to model specification.

Original languageEnglish (US)
Pages (from-to)129-150
Number of pages22
JournalJournal of Real Estate Finance and Economics
Volume25
Issue number2-3
DOIs
StatePublished - Jan 1 2002

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies

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