s of Doctoral Dissertations 565 was virtually perfectly elastic at yield spreads sufficient to cover a minimum risk premium over government bonds. The constraints upon the volume of residential construction and mortgage financing in this period were shortages of building materials, labor, and industrial capacity. As industrial capacity and availability of these materials varied, so did the volume of residential construction. After 1953 institutional portfolio imbalances had largely been eliminated and the supply of mortgage financing had become more closely a function of short-term relative yield spreads. The volume of mortgage lending and residential construction activity was constrained by the availability of mortgage financing, and fluctuations in residential construction activity and flows of funds into mortgages largely coincided with fluctuations in relative yield spreads on financial investments arising either from variations in the general level of economic activity or government policy. The sensitivity of residential construction activity to variations in terms and availability of mortgage financing and relative interest yields makes this sector highly responsive to government policy. However, the potential effectiveness of government stabilization policies in this area depends also upon the time lags required from the initiation of a government policy until its impact. These lags are shown to be sufficiently short so as to provide government policy with the potential to play a strong anticyclical role. Initial employment and expenditure effects arising from an increase in mortgage approvals are felt approximately two to three months and peak employment and expenditure effects five to six months after a change in mortgage approvals. Monetary policies and most selective credit and direct lending policies affect the volume of mortgage approvals within one to two months from the date of their inception and, therefore, initial employment and expenditure effects are felt four to five months and peak effects seven to eight months after the initiation of a government policy. Government policies designed to influence the volume of residential construction activity and thereby exert a stabilizing influence on the economy fall into three main categories: general monetary policies, selective credit policies primarily associated with the federal loan insurance program under the National Housing Acts, and selective credit policies primarily associated with the federal direct lending program under the auspices of Central Mortgage and Housing Corporation. Unfortunately, although the government has this multiplicity of policies at its disposal it has not selected and sufficiently co-ordinated these policies in the past so as to derive maximum benefit from them, or even to consistently exert a stabilizing influence upon the economy. However, the stabilizing potential of these policies remains great and has been sufficiently demonstrated to indicate that, if used in harmony with each other in a manner consistent with proper stabilizing techniques, these policies should be highly effective in the future. This content downloaded from 157.55.39.78 on Sat, 25 Jun 2016 07:08:52 UTC All use subject to http://about.jstor.org/terms