The Housing Market-Bank Credit Relationship: Some Thoughts on Its Causality
The dominance of the orthodox paradigm over the last decades prior to the â€œgreat recessionâ€ left no room for the notion of â€œendogenous moneyâ€ in the development of economic theory. However, this alternative direction of the causality of demand for money-credit and economic activity has been present in the heterodox economic thought since the 1930s and should be reconsidered in the current situation. In this context, the numerous episodes of housing bubbles, which have been taking place since 2007, create the perfect â€œenvironmentâ€ to explore the notion of â€œdynamic monetized production economyâ€. Our theoretical framework is estimated econometrically by using a sample of 6 developed economies which spans from 1970 to 2011. The non-stationary â€œnatureâ€ of our data recommends the use of cointegration techniques (SÃ¸ren Johansen 1995) in order to estimate our models.
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