House Prices, Credit And Willingness To Lend
AbstractThis paper establishes a Tobin’s q model in which house prices fluctuate around their long run equilibrium due to fluctuations in credit availability and income. It is shown that house prices are positively related to credit in the short run, however, negatively related to the availability of credit in the long run. Using survey data on banks’ willingness to lend and data on disintermediation for the US it is shown that the availability of credit is the principal variable driving house prices around their long run equilibrium. Shocks to interest rates and income have only secondary effects on house price fluctuations.
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Bibliographic InfoPaper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2011_3.
Date of creation: 23 Mar 2011
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Willingness to lend; Tobin’s q. House prices;
Other versions of this item:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-02 (All new papers)
- NEP-MAC-2011-04-02 (Macroeconomics)
- NEP-URE-2011-04-02 (Urban & Real Estate Economics)
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