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Mortgage lending and house prices in Albania - a co-integrated analysis based on VECM

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  • Erjona REBI

    (Economic Faculty, University of Tirana, Albania)

Abstract

The general view that the banks’ lending plays a crucial role in the real estate market was again confirmed during the recent financial crisis. During the pre-crisis period, house prices in Albania increased rapidly, supported also by a fast expansion of mortgage lending. This study aims to empirically analyse the relation between housing prices and banks’ financing in the long run, referring to a VECM model. The estimated results confirm the important role of mortgage to house prices. Meanwhile, the relation between house prices and interest rates resulted statistically insignificant. Unlike the previous literature, exchange rate has been included as an endogenous variable. Results show positive correlation and statistical significance between house prices and exchange rate. Finally, this paper is expected to contribute to the literature as there are very few studies that elaborate on the macroeconomic factors’ influence on the housing prices in Albania.

Suggested Citation

  • Erjona REBI, 2014. "Mortgage lending and house prices in Albania - a co-integrated analysis based on VECM," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5, pages 79-98, June.
    • Handle: RePEc:jes:journl:y:2014:v:5:p:79-98
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    File URL: http://ejes.uaic.ro/articles/EJES2014_0501_REB.pdf
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    1. Ansgar Belke & Robert Czudaj, 2010. "Is Euro Area Money Demand (Still) Stable? Cointegrated VAR Versus Single Equation Techniques," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(4), pages 285-315.
    2. Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack & Christopher J. Mayer, 2002. "Determinants of Real House Price Dynamics," NBER Working Papers 9262, National Bureau of Economic Research, Inc.
    3. Giovanni Dell'Ariccia & Pau Rabanal & Christopher W. Crowe & Deniz O Igan, 2011. "Policies for Macrofinancial Stability; Options to Deal with Real Estate Booms," IMF Staff Discussion Notes 11/02, International Monetary Fund.
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    Cited by:

    1. Mustafa Kahveci & Ernil Sabaj, 2017. "Determinant of Housing Rents in Urban Albania: An Empirical Hedonic Price Application with NSA Survey Data," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 5(2), pages 51-65.
    2. Charles Njoroge & Willy M. Muturi & Oluoch Oluoch, 2019. "Exchange Rate and Performance of the Residential Property Market in Kenya," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 8(3), pages 88-100, July.

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