FEDERAL LENDING AND AGGREGATE ECONOMIC-ACTIVITY

Attention to federal activity in credit markets is typically focused o n the government's role as a borrower. In contrast, scant attention is paid to its equally large and dominant role as a lender. This paper e valuates the aggregate impact of federal lending activity within the f ramework of a vector autoregressive representation of the US macroecon omy. The empirical regularities uncovered suggest that aggregate feder al lending activity does not have a net positive impact on output.