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Markets and Housing Finance

  • Veronica Cacdac Warnock
  • Francis E. Warnock

We examine the extent to which markets enable the provision of housing finance across a wide range of countries. Housing is a major purchase requiring long-term financing, and the factors that are associated with well functioning housing finance systems are those that enable the provision of long-term finance. Across all countries, controlling for country size, we find that countries with stronger legal rights for borrowers and lenders (through collateral and bankruptcy laws), deeper credit information systems, and a more stable macroeconomic environment have deeper housing finance systems. These same factors also help explain the variation in housing finance across emerging market economies. Across developed countries, which tend to have low macroeconomic volatility and relatively extensive credit information systems, variation in the strength of legal rights helps explain the extent of housing finance. We also examine another potential factor--the existence of sizeable government securities markets--that might enable the development of emerging markets' housing finance systems, but we find no evidence supporting that.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13081.

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Date of creation: May 2007
Date of revision:
Publication status: published as Warnock, V., and F. Warnock, 2008. "Markets and Housing Finance." Journal of Housing Economics 17: 239-251
Handle: RePEc:nbr:nberwo:13081
Note: IFM CF
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