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Bank Lending and Property Prices in Hong Kong

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Author Info

  • Stefan Gerlach

    (Hong Kong Monetary Authority
    Hong Kong Institute for Monetary Research and the CEPR)

  • Wensheng Peng

    (Hong Kong Monetary Authority)

Abstract

This paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy can not be used to guard against asset price swings. Third, despite the collapse in property prices since 1998, the banking sector remains sound. While the contemporaneous correlation between lending and property prices is large, our results suggest that the direction of influence goes from property prices to bank credit rather than conversely.

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Bibliographic Info

Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 122003.

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Length: 24 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:hkm:wpaper:122003

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Keywords: Property prices; bank lending; Hong Kong;

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References

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  1. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  2. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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  4. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
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  8. Christoph Duenwald, 2000. "Property Prices and Speculative Bubbles," IMF Working Papers 00/2, International Monetary Fund.
  9. Meese Richard & Wallace Nancy, 1994. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco?," Journal of Urban Economics, Elsevier, vol. 35(3), pages 245-266, May.
  10. Burkhard Drees & Ceyla Pazarbasioglu, 1995. "The Nordic Banking Crises," IMF Working Papers 95/61, International Monetary Fund.
  11. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  12. Russell Davidson & James G. MacKinnon, 1987. "Testing for Consistency using Artificial Regressions," Working Papers 687, Queen's University, Department of Economics.
  13. Davidson, R. & MacKinnon & J.G., 1999. "Artificial Regressions," G.R.E.Q.A.M. 99a04, Universite Aix-Marseille III.
  14. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  15. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  16. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  17. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  18. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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