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Interest Rate Elasticity of Residential Housing Prices

Author

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  • Plamen K Iossifov
  • Martin Cihak
  • Amar Shanghavi

Abstract

We examine the interest rate elasticity of housing prices, advancingthe empirical literature in two directions. First, we take a commonly used cross-country panel dataset and evaluate the housing price equation using a consistent estimator in the presence of endogenous explanatory variables and a lagged dependent variable. Second, we carry-out a novel analysis of determinants of residential housing prices in a cross-section of countries. Our results show that the short-term interest rate, and hence monetary policy, has a sizable impact on residential housing prices.

Suggested Citation

  • Plamen K Iossifov & Martin Cihak & Amar Shanghavi, 2008. "Interest Rate Elasticity of Residential Housing Prices," IMF Working Papers 08/247, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/247
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    Cited by:

    1. P. Arestis & A.R. González, 2014. "Modelling the housing market in OECD countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(2), pages 131-153, March.
    2. Ghosh, Saibal, 2010. "Credit Growth, Bank Soundness and Financial Fragility: Evidence from Indian Banking Sector," MPRA Paper 24715, University Library of Munich, Germany.
    3. Oestmann Marco & Bennöhr Lars, 2015. "Determinants of house price dynamics. What can we learn from search engine data?," Review of Economics, De Gruyter, vol. 66(1), pages 99-127, April.
    4. Luis M. Cubeddu & Camilo E Tovar Mora & Evridiki Tsounta, 2012. "Latin America; Vulnerabilities Under Construction?," IMF Working Papers 12/193, International Monetary Fund.
    5. Hense, Florian, 2015. "Interest rate elasticity of bank loans: The case for sector-specific capital requirements," CFS Working Paper Series 504, Center for Financial Studies (CFS).
    6. Béchir Bouzid, 2010. "Titrisation des emprunts hypothécaires et bulle immobilière aux États-Unis : les origines d’une débâcle," Revue d'Économie Financière, Programme National Persée, vol. 97(2), pages 101-142.
    7. Obstfeld, Maurice & Rogoff, Kenneth, 2009. "Global imbalances and the financial crisis: products of common causes," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 131-172.
    8. Serven, Luis & Nguyen, Ha, 2010. "Global imbalances before and after the global crisis," Policy Research Working Paper Series 5354, The World Bank.
    9. Ivan Nikoliæ, 2015. "Price determinants of newly built dwelling in Serbia," Working papers 29, National Bank of Serbia.
    10. Abdul Aziz, Ahmad Faizal, 2011. "Causality of Residential Properties Price Movements in Malaysia," MPRA Paper 47682, University Library of Munich, Germany.
    11. Plamen K Iossifov & Jiri Podpiera, 2014. "Are Non-Euro Area EU Countries Importing Low Inflation from the Euro Area?," IMF Working Papers 14/191, International Monetary Fund.
    12. Koetter, Michael & Poghosyan, Tigran, 2010. "Real estate prices and bank stability," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1129-1138, June.

    More about this item

    Keywords

    Economic models; Real estate prices; Interest rate policy; Housing prices; equation; real estate; equations; regression analysis;

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