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Interaction between housing prices and household borrowing: The Finnish case

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  • 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.

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  • 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
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    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

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