IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v33y2009i4p747-756.html
   My bibliography  Save this article

Interaction between housing prices and household borrowing: The Finnish case

Author

Listed:
  • Oikarinen, Elias

Abstract

Employing time series econometrics this study shows that there has been a significant two-way interaction between housing prices and housing loan stock in Finland since the financial liberalization in the late 1980s. Before the financial deregulation the interaction was substantially weaker. Furthermore, housing appreciation has a notable positive impact on the outstanding consumption loan stock. It appears that there is no similar relationship between stock prices and credit. Understanding the two-way interaction between housing prices and credit is of importance, since the interdependence is likely to augment boom-bust cycles in the economy and increase the fragility of the financial sector.

Suggested Citation

  • Oikarinen, Elias, 2009. "Interaction between housing prices and household borrowing: The Finnish case," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 747-756, April.
  • Handle: RePEc:eee:jbfina:v:33:y:2009:i:4:p:747-756
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378-4266(08)00271-9
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Drake, Leigh & Hall, Maximilian J.B. & Simper, Richard, 2006. "The impact of macroeconomic and regulatory factors on bank efficiency: A non-parametric analysis of Hong Kong's banking system," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1443-1466, May.
    2. Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008. "The expansion of services in European banking: Implications for loan pricing and interest margins," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2325-2335, November.
    3. Stephen G. Cecchetti, 2008. "Measuring the Macroeconomic Risks Posed by Asset Price Booms," NBER Chapters,in: Asset Prices and Monetary Policy, pages 9-43 National Bureau of Economic Research, Inc.
    4. Frederic S. Mishkin, 2007. "Housing and the monetary transmission mechanism," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 359-413.
    5. Barakova, Irina & Bostic, Raphael W. & Calem, Paul S. & Wachter, Susan M., 2003. "Does credit quality matter for homeownership?," Journal of Housing Economics, Elsevier, vol. 12(4), pages 318-336, December.
    6. Gerlach, Stefan & Peng, Wensheng, 2005. "Bank lending and property prices in Hong Kong," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 461-481, February.
    7. Diaz-Serrano, Luis, 2005. "Labor income uncertainty, skewness and homeownership: A panel data study for Germany and Spain," Journal of Urban Economics, Elsevier, vol. 58(1), pages 156-176, July.
    8. Christopher D. Carroll & Misuzu Otsuka & Jirka Slacalek, 2006. "How Large Is the Housing Wealth Effect? A New Approach," NBER Working Papers 12746, National Bureau of Economic Research, Inc.
    9. Iacoviello, Matteo, 2004. "Consumption, house prices, and collateral constraints: a structural econometric analysis," Journal of Housing Economics, Elsevier, pages 304-320.
    10. Doornik, Jurgen A, 1998. " Approximations to the Asymptotic Distributions of Cointegration Tests," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 573-593, December.
    11. DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
    12. Jokipii, Terhi & Milne, Alistair, 2008. "The cyclical behaviour of European bank capital buffers," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1440-1451, August.
    13. Jeremy C. Stein, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 379-406.
    14. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, pages 249-267.
    15. Doornik, Jurgen A & Hendry, David F & Nielsen, Bent, 1998. " Inference in Cointegrating Models: UK M1 Revisited," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 533-572, December.
    16. François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 459-485.
    17. Robert J. Shiller, 2007. "Understanding recent trends in house prices and homeownership," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 89-123.
    18. Liang, Qi & Cao, Hua, 2007. "Property prices and bank lending in China," Journal of Asian Economics, Elsevier, vol. 18(1), pages 63-75, February.
    19. Hort, Katinka, 1998. "The Determinants of Urban House Price Fluctuations in Sweden 1968-1994," Journal of Housing Economics, Elsevier, vol. 7(2), pages 93-120, June.
    20. Johansen, S ren, 2000. "A Bartlett Correction Factor For Tests On The Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 16(05), pages 740-778, October.
    21. Riddel, Mary, 2004. "Housing-market disequilibrium: an examination of housing-market price and stock dynamics 1967-1998," Journal of Housing Economics, Elsevier, vol. 13(2), pages 120-135, June.
    22. Yamashita, Takashi, 2007. "House price appreciation, liquidity constraints, and second mortgages," Journal of Urban Economics, Elsevier, vol. 62(3), pages 424-440, November.
    23. Honohan, Patrick, 2008. "Cross-country variation in household access to financial services," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2493-2500, November.
    24. Martin S. Feldstein, 2007. "Housing, Credit Markets and the Business Cycle," NBER Working Papers 13471, National Bureau of Economic Research, Inc.
    25. Diaz-Serrano, Luis, 2005. "On the negative relationship between labor income uncertainty and homeownership: Risk-aversion vs. credit constraints," Journal of Housing Economics, Elsevier, vol. 14(2), pages 109-126, June.
    26. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
    27. Jin, Yi & Zeng, Zhixiong, 2004. "Residential investment and house prices in a multi-sector monetary business cycle model," Journal of Housing Economics, Elsevier, vol. 13(4), pages 268-286, December.
    28. Abdelhak S Senhadji & Charles Collyns, 2002. "Lending Booms, Real Estate Bubbles and the Asian Crisis," IMF Working Papers 02/20, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Lending Borrowing Housing Stocks Dynamics;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:33:y:2009:i:4:p:747-756. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jbf .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.