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The Interaction between Mortgage Financing and Housing Prices in Greece

Author

Listed:
  • Sophocles N. Brissimis

    () (Bank of Greece and University of Piraeus)

  • Thomas Vlassopoulos

    (European Central Bank)

Abstract

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.

Suggested Citation

  • Sophocles N. Brissimis & Thomas Vlassopoulos, 2007. "The Interaction between Mortgage Financing and Housing Prices in Greece," Working Papers 58, Bank of Greece.
  • Handle: RePEc:bog:wpaper:58
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Housing loans; Housing prices; Multivariate cointegration;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • 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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