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Insight from a Time-Varying VAR Model with Stochastic Volatility of the French Housing and Credit Markets

Author

Listed:
  • Sanvi Avouyi-Dovi
  • Claire Labonne
  • Rémy Lecat
  • Simon Ray

Abstract

Through a time-varying VAR model with drifting parameters and stochastic volatilities (Cogley and Sargent, 2005, Primiceri, 2005), we explore nonlinearities on the French housing and credit markets, which give rich insights on the persistent bubble of the 2000s. While the price increase took place during a period of low shock variance, shock persistence increased during this period, as well as the elasticity relative to demography and income. Low reactivity of the housing stock to housing prices may create construction bottlenecks and explain these nonlinearities. However, even though our framework is very flexible, part of the price increase remains unexplained.

Suggested Citation

  • Sanvi Avouyi-Dovi & Claire Labonne & Rémy Lecat & Simon Ray, 2017. "Insight from a Time-Varying VAR Model with Stochastic Volatility of the French Housing and Credit Markets," Working papers 620, Banque de France.
    • Handle: RePEc:bfr:banfra:620
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    References listed on IDEAS

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    1. Avouyi-Dovi, S. & Lecat, R. & Labonne, C., 2016. "The French housing market: what would be the impact of macroprudential measures?," Rue de la Banque, Banque de France, issue 26, june..
    2. Adam Altăr & Matei Nicolae Kubinschi & Alina Zaharia, 2021. "Uncovering the Dynamic Relationship between Credit and Sustainable Economic Growth in Selected CEE Countries," Sustainability, MDPI, vol. 13(11), pages 1-19, June.
    3. Amine Ben Amar, 2022. "On the role of Islamic banks in the monetary policy transmission in Saudi Arabia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 55-94, March.
    4. Ronald Henry Lange, 2018. "The Monetary Transmission Mechanism in Canada: A Time-Varying Vector Autoregression with Stochastic Volatility," Applied Economics and Finance, Redfame publishing, vol. 5(6), pages 42-51, November.
    5. Ge, Futing & Zhang, Weiguo, 2022. "The determinants of cross-border bond risk premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).

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    Keywords

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    JEL classification:

    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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