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Credit conditions in a boom and bust property market

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  • McCarthy, Yvonne

    (Central Bank of Ireland)

  • McQuinn, Kieran

    (Central Bank of Ireland)

Abstract

The interrelationship between house prices and mortgage credit has been one of the more compelling issues to warrant attention after the recent financial crisis. Considerable financial innovation and liberalisation of wholesale international funding markets over the past 20 years greatly increased the ability of banking sectors to extend credit to the real economy. Almost inevitably many countries experienced significant house price booms over this period. The rate of house price appreciation in Ireland outstripped that of most in the OECD. Availing of two new related databases of Irish mortgaged households, this paper, firstly, quantifies the respective contribution to house price movements of changing credit conditions and, secondly, estimates an index of mortgage credit availability in the Irish property market, (MMCI), over the period 2000 - 2010.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 08/RT/13.

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Date of creation: Oct 2013
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Handle: RePEc:cbi:wpaper:08/rt/13

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Keywords: Credit; House Prices; Income; Interest Rates; Macro prudential.;

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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the Flow of Funds," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 94-2, Federal Reserve Bank of Chicago.
  2. repec:cbi:wpaper:5/rt/04 is not listed on IDEAS
  3. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 24(1), pages 1-33, spring.
  4. Lown, Cara & Morgan, Donald P., 2004. "The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey," SIFR Research Report Series, Institute for Financial Research 27, Institute for Financial Research.
  5. John Y. Campbell & João F. Cocco, 2011. "A Model of Mortgage Default," NBER Working Papers 17516, National Bureau of Economic Research, Inc.
  6. John V. Duca & John Muellbauer & Anthony Murphy, 2010. "Housing markets and the financial crisis of 2007-2009: lessons for the future," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33613, London School of Economics and Political Science, LSE Library.
  7. Stefan Gerlach & Wensheng Peng, 2003. "Bank Lending and Property Prices in Hong Kong," Working Papers, Hong Kong Institute for Monetary Research 122003, Hong Kong Institute for Monetary Research.
  8. repec:cbi:wpaper:9/rt/11 is not listed on IDEAS
  9. Kelly, Robert & McCarthy, Yvonne & McQuinn, Kieran, 2012. "Impairment and negative equity in the Irish mortgage market," Journal of Housing Economics, Elsevier, Elsevier, vol. 21(3), pages 256-268.
  10. Ben S. Bernanke & Ilian Mihov, 1995. "Measuring monetary policy," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 95-09, Federal Reserve Bank of San Francisco.
  11. 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, Economic and Social Studies, vol. 40(4), pages 371-392.
  12. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, Econometric Society, vol. 61(4), pages 783-820, July.
  13. Trevor Fitzpatrick & Kieran Mcquinn, 2007. "House Prices And Mortgage Credit: Empirical Evidence For Ireland," Manchester School, University of Manchester, University of Manchester, vol. 75(1), pages 82-103, 01.
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  15. Cameron, Gavin & Muellbauer, John & Murphy, Anthony, 2006. "Was There a British House Price Bubble? Evidence from a Regional Panel," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5619, C.E.P.R. Discussion Papers.
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