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Bank Lending and Property Prices in Hong Kong

Author Info

Listed author(s):
  • Stefan Gerlach

    (Hong Kong Monetary Authority
    Hong Kong Institute for Monetary Research and the CEPR)

  • Wensheng Peng

    (Hong Kong Monetary Authority)

Abstract

This paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy can not be used to guard against asset price swings. Third, despite the collapse in property prices since 1998, the banking sector remains sound. While the contemporaneous correlation between lending and property prices is large, our results suggest that the direction of influence goes from property prices to bank credit rather than conversely.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 122003.

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Length: 24 pages
Date of creation: Jun 2003
Handle: RePEc:hkm:wpaper:122003
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Keywords: Property prices; bank lending; Hong Kong;

Other versions of this item:

Find related papers by JEL classification:
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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  1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
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  11. Boris Hofmann, 2003. "Bank Lending and Property Prices: Some International Evidence," Working Papers 222003, Hong Kong Institute for Monetary Research.
  12. Burkhard Drees & Ceyla Pazarbasioglu, 1995. "The Nordic Banking Crises; Pitfalls in Financial Liberalization?," IMF Working Papers 95/61, International Monetary Fund.
  13. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
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  16. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
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  18. Abdelhak S Senhadji & Charles Collyns, 2002. "Lending Booms, Real Estate Bubbles and the Asian Crisis," IMF Working Papers 02/20, International Monetary Fund.
  19. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
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