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The Interaction between Mortgage Financing and Housing Prices in Greece

Listed author(s):
  • Sophocles N. Brissimis

    ()

    (Bank of Greece and University of Piraeus)

  • Thomas Vlassopoulos

    (European Central Bank)

Although the close empirical relationship between the evolution of mortgage lending and housing prices is well established in the literature, the direction of causation is less clear from a theoretical standpoint. We apply multivariate cointegration techniques in order to address this issue empirically for the Greek economy. Our results, based on a cointegration relationship that we identify as a mortgage loan demand equation, indicate that housing prices do not adjust to disequilibria in the market for housing loans. This suggests that in the long run the causation does not run from mortgage lending to housing prices. In the short run we find evidence of a contemporaneous bi-directional dependence.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200758.pdf
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Paper provided by Bank of Greece in its series Working Papers with number 58.

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Length: 31 pages
Date of creation: Mar 2007
Handle: RePEc:bog:wpaper:58
Contact details of provider: Web page: http://www.bankofgreece.gr

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