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The Credit Channel of Monetary Policy and Housing Markets: International Empirical Evidence

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Author Info

  • Iacoviello, Matteo

    (Bank of Finland Research)

  • Minetti, Raoul

Abstract

This paper tests for the presence of a credit channel (particularly a bank-lending sub-channel) for monetary policy in the housing market. We argue that the importance of this channel for investment in residential housing is highly dependent on the structural features, and particularly the efficiency and institutional organization, of housing finance. We employ a VAR methodology to analyse this issue with respect to the housing markets of four European countries (Finland, Germany, Norway and the United Kingdom), which differ greatly in terms of structural features. Our results are generally consistent with the existence of a broad credit channel, whereas the bank-lending channel seems to be operational only under certain conditions. More importantly, our results are consistent with previous analyses of housing market efficiency, which strongly suggests the existence of a clear relationship between the presence of a credit (bank lending) channel, the efficiency level of housing finance, and the type of institutions that are active in mortgage provision.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0014.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 14/2000.

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Length: 49 pages
Date of creation: 09 Oct 2000
Date of revision:
Handle: RePEc:hhs:bofrdp:2000_014

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Related research

Keywords: monetary transmission; bank lending channel; house prices; vector autoregressions;

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Cited by:
  1. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
  2. Gurdgiev, Constantin T., 2006. "Owner-occupied housing in a model of exchange rate determination," Journal of Housing Economics, Elsevier, vol. 15(3), pages 217-229, September.
  3. Aoki, Kosuke & Proudman, James & Vlieghe, Gertjan, 2004. "House prices, consumption, and monetary policy: a financial accelerator approach," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 414-435, October.

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