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The Determinants of Bank Credit in Industrialized Countries: Do Property Prices Matter?

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  • Boris Hofmann

Abstract

In this study, we analyse the determinants of bank credit to the private non-financial sector in 16 industrialized countries based on a cointegrating VAR. Cointegration analysis suggests that property prices are an important determinant of the long-run borrowing capacity of the private sector, which needs to be taken into account to explain the long-run movements of bank lending. Impulse response analysis reveals that innovations to property prices also have a highly significant and persistent positive dynamic effect on bank lending. This result suggests that innovations to property prices may give rise to significant and persistent cycles in bank lending and are thus a potential explanation for the persistent financial cycles observed in the past. Copyright Blackwell Publishing Ltd. 2004

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Bibliographic Info

Article provided by Wiley Blackwell in its journal International Finance.

Volume (Year): 7 (2004)
Issue (Month): 2 (07)
Pages: 203-234

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Handle: RePEc:bla:intfin:v:7:y:2004:i:2:p:203-234

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Cited by:
  1. Buncic, Daniel & Martin Melecky, 2013. "Equilibrium Credit: The Reference Point for Macroprudential Supervisors," Economics Working Paper Series 1301, University of St. Gallen, School of Economics and Political Science.
  2. Addison-Smyth, Diarmaid & McQuinn, Kieran & O'Reilly, Gerard, 2009. "Modelling Credit in the Irish Mortgage Market," The Economic and Social Review, Economic and Social Studies, vol. 40(4), pages 371-392.
  3. Michael Frömmel & Torsten Schmidt, 2006. "Bank Lending and Asset Prices in the Euro Area," RWI Discussion Papers 0042, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  4. Sophocles Brissimis & Thomas Vlassopoulos, 2009. "The Interaction between Mortgage Financing and Housing Prices in Greece," The Journal of Real Estate Finance and Economics, Springer, vol. 39(2), pages 146-164, August.
  5. Bouvatier, Vincent & López-Villavicencio, Antonia & Mignon, Valérie, 2014. "Short-run dynamics in bank credit: Assessing nonlinearities in cyclicality," Economic Modelling, Elsevier, vol. 37(C), pages 127-136.
  6. Michal Rubaszek & Dobromil Serwa, 2011. "Determinants of credit to households in a life-cycle model," National Bank of Poland Working Papers 92, National Bank of Poland, Economic Institute.
  7. Koetter, Michael & Poghosyan, Tigran, 2008. "Real estate markets and bank distress," Discussion Paper Series 2: Banking and Financial Studies 2008,18, Deutsche Bundesbank, Research Centre.
  8. Gimeno, Ricardo & Martí­nez-Carrascal, Carmen, 2010. "The relationship between house prices and house purchase loans: The Spanish case," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1849-1855, August.
  9. Ioannis Ganoulis & Massimo Giuliodori, 2011. "Financial liberalization and house price dynamics in Europe," Applied Economics, Taylor & Francis Journals, vol. 43(21), pages 2671-2688.
  10. Marie-Louise Djigbenou, 2014. "Determinants of Global Liquidity Dynamics:a FAVAR approach," Working Papers hal-00956314, HAL.
  11. Ricardo Gimeno & Carmen Martínez-Carrascal, 2006. "The interaction between house prices and loans for house purchase. The Spanish case," Banco de Espa�a Working Papers 0605, Banco de Espa�a.

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