IDEAS home Printed from https://ideas.repec.org/a/onb/oenbfi/y2019iq3-19b5.html
   My bibliography  Save this article

The impact of housing markets on banks’ risk-taking behavior: evidence from CESEE

Author

Listed:

Abstract

This study empirically evaluates the impact of housing market dynamics and banks’ housing market exposure on banking sector stability in Central, Eastern and Southeastern Europe (CESEE). We investigate whether there are differences between the behavior of banks located in CESEE EU Member States and the behavior of banks located in the Western Balkans. We find evidence that banks’ exposure to the housing market has a significant positive impact on bank stability in both groups of countries. Furthermore, for real estate banks in CESEE EU Member States, we find that house price dynamics are positively correlated with bank stability. This outcome may possibly be related to the fact that real estate banks in these countries have better housing market expertise and, moreover, to the generally more advanced institutional environment. At the same time, we find a negative relationship between house price dynamics and bank stability for real estate banks in the Western Balkans, which might reflect the less advanced stage of institutional development in the region.

Suggested Citation

  • Elona Dushku & Antje Hildebrandt & Erjona Suljoti, 2019. "The impact of housing markets on banks’ risk-taking behavior: evidence from CESEE," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/19, pages 55-75.
    • Handle: RePEc:onb:oenbfi:y:2019:i:q3/19:b:5
    as

    Download full text from publisher

    File URL: https://www.oenb.at/dam/jcr:fb9d91a7-64b1-4205-b3e2-cf047821e4b6/06_PB_focus_2019-Q3_screen_The%20impact%20of%20housing%20markets%20on%20banks.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Martin Cihak & Mr. Heiko Hesse, 2007. "Cooperative Banks and Financial Stability," IMF Working Papers 2007/002, International Monetary Fund.
    2. Morgan, Peter & Zhang, Yan, 2015. "ADBI WP543: Mortgage Lending and Financial Stability in Asia," ADBI Working Papers 543, Asian Development Bank Institute.
    3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    4. Elisabeth Beckmann, 2017. "How does foreign currency debt relief affect households’ loan demand? Evidence from the OeNB Euro Survey in CESEE," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-32.
    5. Cerutti, Eugenio & Dagher, Jihad & Dell'Ariccia, Giovanni, 2017. "Housing finance and real-estate booms: A cross-country perspective," Journal of Housing Economics, Elsevier, vol. 38(C), pages 1-13.
    6. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    7. Altunbas, Yener & Binici, Mahir & Gambacorta, Leonardo, 2018. "Macroprudential policy and bank risk," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 203-220.
    8. Lucia Gibilaro & Gianluca Mattarocci, 2016. "Are Real Estate Banks More Affected by Real Estate Market Dynamics?," International Real Estate Review, Global Social Science Institute, vol. 19(2), pages 151-170.
    9. Blasko, Matej & Sinkey, Joseph Jr., 2006. "Bank asset structure, real-estate lending, and risk-taking," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(1), pages 53-81, February.
    10. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
    11. Altunbas, Yener & Manganelli, Simone & Marques-Ibanez, David, 2017. "Realized bank risk during the great recession," Journal of Financial Intermediation, Elsevier, vol. 32(C), pages 29-44.
    12. Ádám Banai & Nikolett Vágó, 2018. "The effect of house prices on bank risk: empirical evidence from Hungary," NBP Working Papers 289, Narodowy Bank Polski.
    13. World Bank, 2018. "Doing Business 2018," World Bank Publications - Books, The World Bank Group, number 28608, December.
    14. Robert A. Eisenbeis & Myron L. Kwast, 1989. "Are real estate specializing depositories viable? The evidence from commercial banks," Finance and Economics Discussion Series 88, Board of Governors of the Federal Reserve System (U.S.).
    15. Beck, Thorsten, 2008. "Bank competition and financial stability : friends or foes ?," Policy Research Working Paper Series 4656, The World Bank.
    16. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    17. Daglish, Toby, 2009. "What motivates a subprime borrower to default?," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 681-693, April.
    18. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    19. Erjona REBI, 2016. "The relevance of the housing market for the banks’ risk profile in Albania," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7, pages 151-168, June.
    20. Koetter, Michael & Poghosyan, Tigran, 2010. "Real estate prices and bank stability," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1129-1138, June.
    21. Claudio Borio & Mathias Drehmann, 2009. "Assessing the risk of banking crises - revisited," BIS Quarterly Review, Bank for International Settlements, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Al-Jahwari, Salim Ahmed Said, 2021. "Does the Twin-Deficits doctrine apply to the Gulf Cooperation Council? A dynamic panel VAR-X model approach," MPRA Paper 111232, University Library of Munich, Germany.
    2. Lauren Stagnol, 2015. "Designing a corporate bond index on solvency criteria," EconomiX Working Papers 2015-39, University of Paris Nanterre, EconomiX.
    3. Joakim Westerlund & Jörg Breitung, 2013. "Lessons from a Decade of IPS and LLC," Econometric Reviews, Taylor & Francis Journals, vol. 32(5-6), pages 547-591, August.
    4. Caterina Di Tommaso & John Thornton, 2020. "Do ESG scores effect bank risk taking and value? Evidence from European banks," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(5), pages 2286-2298, September.
    5. Nguyen Phuc Canh & Nguyen Thanh Binh & Su Dinh Thanh & Christophe Schinckus, 2020. "Determinants of foreign direct investment inflows: The role of economic policy uncertainty," International Economics, CEPII research center, issue 161, pages 159-172.
    6. Merike Kukk & Karsten Staehr, 2015. "Macroeconomic factors in corporate and household saving. Evidence from Central and Eastern Europe," Bank of Estonia Working Papers wp2015-5, Bank of Estonia, revised 30 Dec 2015.
    7. Emmanuel Owusu-Sekyere & Reneé van Eyden & Francis M Kemegue, 2014. "Remittances and the Dutch Disease in Sub-Saharan Africa: A Dynamic Panel Approach," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 8(3), September.
    8. Binder, Michael & Hsiao, Cheng & Pesaran, M. Hashem, 2005. "Estimation And Inference In Short Panel Vector Autoregressions With Unit Roots And Cointegration," Econometric Theory, Cambridge University Press, vol. 21(4), pages 795-837, August.
    9. Peter Phillips & Hyungsik Moon, 2000. "Nonstationary panel data analysis: an overview of some recent developments," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 263-286.
    10. MAGAZZINO, Cosimo & LEOGRANDE, Angelo, 2021. "Subjective Well-Being In Italian Regions: A Panel Data Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 21(1), pages 1-18.
    11. Ramesh Bommadevara & Akshay Sakharkar, 2021. "Do Good Institutions and Economic Uncertainty Matter to Foreign Direct Investment?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(6), pages 471-487, June.
    12. E. Tsanana & X. Chapsa & C. Katrakilidis, 2016. "Is growth corrupted or bureaucratic? Panel evidence from the enlarged EU," Applied Economics, Taylor & Francis Journals, vol. 48(33), pages 3131-3147, July.
    13. Brown, Timothy Tyler, 2014. "How effective are public health departments at preventing mortality?," Economics & Human Biology, Elsevier, vol. 13(C), pages 34-45.
    14. Vo, Duc, 2019. "The Impact of Foreign Direct Investment on Environment Degradation: Evidence from Emerging Markets in Asia," MPRA Paper 103292, University Library of Munich, Germany.
    15. Gharehgozli, Orkideh, 2021. "An empirical comparison between a regression framework and the Synthetic Control Method," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 70-81.
    16. Eric S. Lin & Hamid E. Ali & Yu-Lung Lu, 2015. "Does Military Spending Crowd Out Social Welfare Expenditures? Evidence from a Panel of OECD Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(1), pages 33-48, February.
    17. Zheng, Xinye & Yu, Yihua & Wang, Jing & Deng, Huihui, 2013. "Identifying the determinants and spatial nexus of provincial carbon intensity in China: A dynamic spatial panel approach," MPRA Paper 56088, University Library of Munich, Germany.
    18. Sung, Bongsuk, 2015. "Public policy supports and export performance of bioenergy technologies: A dynamic panel approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 477-495.
    19. repec:fst:rfsisf:v:7:y:2022:i:13:p:71-86 is not listed on IDEAS
    20. Eshagh Mansourkiaee, 2023. "Estimating energy demand elasticities for gas exporting countries: a dynamic panel data approach," SN Business & Economics, Springer, vol. 3(1), pages 1-28, January.
    21. Robert Baumann & Victor Matheson, 2011. "Estimating economic impact using ex post econometric analysis: Cautionary tales," Working Papers 1103, College of the Holy Cross, Department of Economics.

    More about this item

    Keywords

    bank risk; housing markets; housing loans; CESEE;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:onb:oenbfi:y:2019:i:q3/19:b:5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Elisabeth Beckmann (email available below). General contact details of provider: https://edirc.repec.org/data/oenbbat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.