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Growth and Credit: Mortgage Securitization through Landschaften in Prussia


This research project explores the origins of covered mortgage bonds and tests for the impact of financial development on economic growth by analyzing the Prussian Landschaften.

In the wake of the recent financial crisis, covered mortgage bonds have been suggested as a way to revitalize and remove the federal guarantees from the US housing market. Landschaften were cooperative mortgage credit institutions founded in late 18th century Prussia and were the first institutionalized mortgage lenders. They re-capitalized the Prussian landed estates by issuing a new asset class of covered mortgage bonds, called Pfandbriefe, that were jointly backed by all member estates. Landschaften included all estates of a geographic region, eliminating selection bias. This makes them a prime case study to test for the effects of credit on the economy.