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Financial infrastructure and house prices

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Abstract

We argue that banks operating in a local market possess better information about the local housing market than do non-local banks. Possessing this information may influence their willingness to grant loans to house buyers and the specifics of the loan terms, which in turn may affect house prices because credit facilitation makes the housing market more efficient. Using a panel data set covering a period from 1993 to 2007 and involving 274 municipalities in Sweden, we establish a positive causal influence of local bank presence on local house prices. There are significant spatial and spillover effects – that is, banks in a municipality affect the housing markets in neighboring municipalities, although to a lesser extent than in their own municipality. Similar results are obtained through a gravity model. The results are robust over time and municipality size.

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File URL: http://www.transportportal.se/swopec/CTS2013-7.pdf
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Bibliographic Info

Paper provided by CTS - Centre for Transport Studies Stockholm (KTH and VTI) in its series Working papers in Transport Economics with number 2013:7.

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Length: 25 pages
Date of creation: 18 Jun 2013
Date of revision:
Handle: RePEc:hhs:ctswps:2013_007

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Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Web page: http://www.cts.kth.se/

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Keywords: House prices; Lending; Financial infrastructure;

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  16. Mitchell A. Petersen & Raghuram G. Rajan, 2000. "Does Distance Still Matter? The Information Revolution in Small Business Lending," NBER Working Papers 7685, National Bureau of Economic Research, Inc.
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  18. Sophocles Brissimis & Thomas Vlassopoulos, 2009. "The Interaction between Mortgage Financing and Housing Prices in Greece," The Journal of Real Estate Finance and Economics, Springer, vol. 39(2), pages 146-164, August.
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