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The interaction between house prices and loans for house purchase. The Spanish case

  • Ricardo Gimeno


    (Banco de España)

  • Carmen Martínez-Carrascal


    (Banco de España)

The aim of this paper is to analyse, using a vector error-correction model (VECM), the dynamic interaction between house prices and loans for house purchase in Spain. The results show that both variables are interdependent in the long run: loans for house purchase depend positively on house prices, while house prices adjust when this credit aggregate departs from the level implied by its long-run determinants. In contrast, disequilibria in house prices are corrected only through changes in this variable. As for short-run dynamics, the results show that the two variables have a positive contemporaneous impact on each other, indicating the existence of mutally reinforcing cycles in both variables.

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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0605.

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Length: 51 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:bde:wpaper:0605
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