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Banking integration and house price co-movement

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  • Landier, Augustin
  • Sraer, David
  • Thesmar, David

Abstract

The correlation in house price growth across US states increased steadily between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first theoretically derive an appropriate measure of banking integration across state pairs and show that house price growth correlation is strongly related to this measure of financial integration. Our instrumental variable estimates suggest that banking integration can explain up to one-fourth of the rise in house price correlation over this period.

Suggested Citation

  • Landier, Augustin & Sraer, David & Thesmar, David, 2017. "Banking integration and house price co-movement," Journal of Financial Economics, Elsevier, vol. 125(1), pages 1-25.
  • Handle: RePEc:eee:jfinec:v:125:y:2017:i:1:p:1-25
    DOI: 10.1016/j.jfineco.2017.03.001
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    Cited by:

    1. Milcheva, Stanimira & Zhu, Bing, 2016. "Bank integration and co-movements across housing markets," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 148-171.
    2. Atif Mian & Amir Sufi & Emil Verner, 2017. "How do Credit Supply Shocks Affect the Real Economy? Evidence from the United States in the 1980s," NBER Working Papers 23802, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Financial integration; Co-movement; House prices;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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