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Bank Lending and Property Prices in Hong Kong

  • Stefan Gerlach

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

  • Wensheng Peng

    (Hong Kong Monetary Authority)

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
Date of revision:
Handle: RePEc:hkm:wpaper:122003
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  1. Christoph Duenwald, 2000. "Property Prices and Speculative Bubbles; Evidence From Hong Kong SAR," IMF Working Papers 00/2, International Monetary Fund.
  2. Davidson, Russell & MacKinnon, James G., 1989. "Testing for Consistency using Artificial Regressions," Econometric Theory, Cambridge University Press, vol. 5(03), pages 363-384, December.
  3. A. Senhadji Semlali & Charles Collyns, 2002. "Lending Booms, Real Estate Bubbles and the Asian Crisis," IMF Working Papers 02/20, International Monetary Fund.
  4. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  5. Burkhard Drees & Ceyla Pazarbasioglu, 1995. "The Nordic Banking Crises; Pitfalls in Financial Liberalization?," IMF Working Papers 95/61, International Monetary Fund.
  6. Boris Hofmann, 2004. "Bank lending and property prices: some international evidence," Money Macro and Finance (MMF) Research Group Conference 2003 46, Money Macro and Finance Research Group.
  7. Meese Richard & Wallace Nancy, 1994. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco?," Journal of Urban Economics, Elsevier, vol. 35(3), pages 245-266, May.
  8. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
  9. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
  10. 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.
  11. 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.
  12. Davidson, R. & MacKinnon & J.G., 1999. "Artificial Regressions," G.R.E.Q.A.M. 99a04, Universite Aix-Marseille III.
  13. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  15. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
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  17. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  18. Nathalie Girouard & Sveinbjörn Blöndal, 2001. "House Prices and Economic Activity," OECD Economics Department Working Papers 279, OECD Publishing.
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