Portfolio Crowding-Out, Empirically Estimated

Abstract

This paper tests hypotheses regarding the parameters in investors' asset-demand functions. The hypothesis that federal bonds are closer substitutes for equity than for money implies “portfolio crowding out” by federal borrowing. Regression studies of asset-demand functions have needed to impose prior beliefs to obtain precise and plausible estimates for the parameters. This paper uses a MLE technique that dominates regression in that it makes full use of the constraint that the parameters are not determined arbitrarily but rather are determined by mean-variance optimization on the part of the investor. The striking conclusion is that portfolio effects are close to zero.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 75 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.