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Interaction between housing prices and household borrowing: The Finnish case

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  • Oikarinen, Elias

Abstract

Employing time series econometrics this study shows that there has been a significant two-way interaction between housing prices and housing loan stock in Finland since the financial liberalization in the late 1980s. Before the financial deregulation the interaction was substantially weaker. Furthermore, housing appreciation has a notable positive impact on the outstanding consumption loan stock. It appears that there is no similar relationship between stock prices and credit. Understanding the two-way interaction between housing prices and credit is of importance, since the interdependence is likely to augment boom-bust cycles in the economy and increase the fragility of the financial sector.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 4 (April)
Pages: 747-756

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:4:p:747-756

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Lending Borrowing Housing Stocks Dynamics;

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References

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Citations

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Cited by:
  1. Karol Jan Borowiecki, 2012. "Dynamics of a Protected Housing Market: The Case of Switzerland," Urban Studies, Urban Studies Journal Limited, vol. 49(14), pages 3195-3210, November.
  2. Ahamada, Ibrahim & Diaz Sanchez, Jose Luis, 2013. "A retrospective analysis of the house prices macro-relationship in the United States," Policy Research Working Paper Series 6549, The World Bank.
  3. Oikarinen, Elias, 2009. "Household borrowing and metropolitan housing price dynamics - Empirical evidence from Helsinki," Journal of Housing Economics, Elsevier, vol. 18(2), pages 126-139, June.
  4. Büyükkarabacak, Berrak & Valev, Neven T., 2010. "The role of household and business credit in banking crises," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1247-1256, June.
  5. Christian Heebøll-Christensen, 2011. "Financial Instability - a Result of Excess Liquidity or Credit Cycles?," Discussion Papers 11-21, University of Copenhagen. Department of Economics.
  6. Beltratti, Andrea & Morana, Claudio, 2010. "International house prices and macroeconomic fluctuations," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 533-545, March.
  7. André K. Anundsen & Eilev S. Jansen, 2013. "Self-reinforcing effects between housing prices and credit: an extended version," Discussion Papers 756, Research Department of Statistics Norway.
  8. Anundsen, André K. & Jansen, Eilev S., 2013. "Self-reinforcing effects between housing prices and credit," Journal of Housing Economics, Elsevier, vol. 22(3), pages 192-212.
  9. 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.
  10. Belke, Ansgar & Orth, Walter & Setzer, Ralph, 2010. "Liquidity and the dynamic pattern of asset price adjustment: A global view," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1933-1945, August.
  11. Mandell, Svante & Wilhelmsson, Mats, 2013. "Financial Infrastructure and House Prices," Working Paper Series 13/7, Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin), Royal Institute of Technology.
  12. Sommervoll, Dag Einar & Borgersen, Trond-Arne & Wennemo, Tom, 2010. "Endogenous housing market cycles," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 557-567, March.
  13. Chen, Pei-Fen & Chien, Mei-Se & Lee, Chien-Chiang, 2011. "Dynamic modeling of regional house price diffusion in Taiwan," Journal of Housing Economics, Elsevier, vol. 20(4), pages 315-332.
  14. Hooi Hooi Lean & Russell Smyth, 2011. "REITs, interest rates and stock prices in Malaysia," Development Research Unit Working Paper Series 01-11, Monash University, Department of Economics.
  15. Koetter, Michael & Poghosyan, Tigran, 2010. "Real estate prices and bank stability," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1129-1138, June.
  16. Athanasios Tagkalakis, 2010. "Fiscal policy and financial market movements," Working Papers 116, Bank of Greece.
  17. Oikarinen, Elias, 2012. "Empirical evidence on the reaction speeds of housing prices and sales to demand shocks," Journal of Housing Economics, Elsevier, vol. 21(1), pages 41-54.
  18. Carbó-Valverde, Santiago & Marques-Ibanez, David & Rodríguez-Fernández, Francisco, 2012. "Securitization, risk-transferring and financial instability: The case of Spain," Journal of International Money and Finance, Elsevier, vol. 31(1), pages 80-101.
  19. Costello, Greg & Fraser, Patricia & Groenewold, Nicolaas, 2011. "House prices, non-fundamental components and interstate spillovers: The Australian experience," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 653-669, March.
  20. Heeho Kim & SaeWoon Park & Sun Hye Lee, 2012. "House Price and Bank Lending in a Premium Submarket in Korea," International Real Estate Review, Asian Real Estate Society, vol. 15(1), pages 1-42.

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