IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Self-reinforcing effects between housing prices and credit: an extended version

The financial crisis has brought the interaction between housing prices and household borrowing into the limelight of economic policy debate. This paper examines the nexus of housing prices and credit in Norway within a structural vector equilibrium correcting model (SVECM) over the period 1986q2- 2008q4. The results establish a two-way interaction in the long-run, so that higher housing prices lead to a credit expansion, which in turn puts an upward pressure on housing prices. Interest rates influence housing prices indirectly through the credit channel. Furthermore, households’ expectations about future development in teir own income as well as in the Norwegian economy have a significant impact on housing price growth. Dynamic simulations show how shocks are propagated and amplified. When we augment the model to include the supply side, these effects are dampened. The paper is an extended version of Anundsen and Jansen (2013b) and it encompasses a previous Discussion Paper 651 (Anundsen and Jansen, 2011).

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ssb.no/en/forskning/discussion-papers/_attachment/142946?_ts=141a239d4a8
Download Restriction: no

Paper provided by Statistics Norway, Research Department in its series Discussion Papers with number 756.

as
in new window

Length:
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:ssb:dispap:756
Contact details of provider: Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway
Phone: (+47) 21 09 00 00
Fax: (+47) 21 09 49 73
Web page: http://www.ssb.no/en/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Sarah J. Carrington & Jakob B. Madsen, 2011. "House Prices, Credit And Willingness To Lend," Economics Series 2011_3, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  2. John V. Duca & John Muellbauer & Anthony Murphy, 2011. "Shifting credit standards and the boom and bust in U.S. house prices," LSE Research Online Documents on Economics 58533, London School of Economics and Political Science, LSE Library.
  3. Stephen Malpezzi, 1998. "A Simple Error Correction Model of House Prices," Wisconsin-Madison CULER working papers 98-11, University of Wisconsin Center for Urban Land Economic Research.
  4. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  5. André K. Anundsen, 2012. "Econometric regime shifts and the US subprime bubble," National Bank of Poland Working Papers 126, National Bank of Poland, Economic Institute.
  6. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679, March.
  7. Meen, Geoffrey P, 1990. "The Removal of Mortgage Market Constraints and the Implications for Econometric Modelling of UK House Prices," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(1), pages 1-23, February.
  8. John V. Duca & John Muellbauer & Anthony Murphy, 2011. "House Prices and Credit Constraints: Making Sense of the US Experience," Economic Journal, Royal Economic Society, vol. 121(552), pages 533-551, 05.
  9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  10. Nathalie Girouard & Mike Kennedy & Paul van den Noord & Christophe André, 2006. "Recent House Price Developments: The Role of Fundamentals," OECD Economics Department Working Papers 475, OECD Publishing.
  11. Dees, S. & Holly, S. & Pesaran, M.H. & Smith, L.V., 2007. "Long Run Macroeconomic Relations in the Global Economy," Cambridge Working Papers in Economics 0661, Faculty of Economics, University of Cambridge.
  12. Gerlach, Stefan & Peng, Wensheng, 2004. "Bank Lending and Property Prices in Hong Kong," CEPR Discussion Papers 4797, C.E.P.R. Discussion Papers.
  13. Pain, Nigel & Westaway, Peter, 1997. "Modelling structural change in the UK housing market: A comparison of alternative house price models," Economic Modelling, Elsevier, vol. 14(4), pages 587-610, October.
  14. André K. Anundsen & Eilev S. Jansen, 2011. "Self-reinforcing effects between housing prices and credit. Evidence from Norway," Discussion Papers 651, Statistics Norway, Research Department.
  15. Gimeno, Ricardo & Martí­nez-Carrascal, Carmen, 2010. "The relationship between house prices and house purchase loans: The Spanish case," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1849-1855, August.
  16. Jakob B Madsen, 2011. "A q Model of House Prices," Monash Economics Working Papers 03-11, Monash University, Department of Economics.
  17. Sophocles Brissimis & Thomas Vlassopoulos, 2009. "The Interaction between Mortgage Financing and Housing Prices in Greece," The Journal of Real Estate Finance and Economics, Springer, vol. 39(2), pages 146-164, August.
  18. Roger Hammersland & Dag Henning Jacobsen, 2008. "The Financial Accelerator: Evidence using a procedure of Structural Model Design," Discussion Papers 569, Statistics Norway, Research Department.
  19. M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2002. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Center for Financial Institutions Working Papers 01-38, Wharton School Center for Financial Institutions, University of Pennsylvania.
  20. Poterba, James M, 1984. "Tax Subsidies to Owner-occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 729-52, November.
  21. Jakob B Madsen, 2011. "A Repayment Model of House Prices," Monash Economics Working Papers 09-11, Monash University, Department of Economics.
  22. 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.
  23. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
  24. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  25. Hubbard R. Glenn & Mayer Christopher J, 2009. "The Mortgage Market Meltdown and House Prices," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(3), pages 1-47, March.
  26. Muellbauer, J & Murphy, A, 1996. "Booms and Busts in the UK Housing Market," Economics Papers 125, Economics Group, Nuffield College, University of Oxford.
  27. Gunnar Bardsen & Eilev S. Jansen & Ragnar Nymoen, 2003. "Econometric inflation targeting," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 430-461, December.
  28. Elias Oikarinen, 2008. "Interaction between housing prices and household borrowing - the Finnish case," Discussion Papers 29, Aboa Centre for Economics.
  29. Fitzpatrick, Trevor & McQuinn, Kieran, 2004. "House Prices and Mortgage Credit: Empirical Evidence for Ireland," Research Technical Papers 5/RT/04, Central Bank of Ireland.
  30. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  31. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502, March.
  32. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 1-33, spring.
  33. Meen, Geoffrey, 2002. "The Time-Series Behavior of House Prices: A Transatlantic Divide?," Journal of Housing Economics, Elsevier, vol. 11(1), pages 1-23, March.
  34. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
  35. Koetter, Michael & Poghosyan, Tigran, 2010. "Real estate prices and bank stability," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1129-1138, June.
  36. Kieran McQuinn & Nuala O’Donnell & Mary Ryan, 2005. "Central Bank and Financial Services Authority of Ireland's model," Chapters, in: Econometric Models of the Euro-area Central Banks, chapter 11 Edward Elgar.
  37. Anundsen, André K. & Jansen, Eilev S., 2013. "Self-reinforcing effects between housing prices and credit," Journal of Housing Economics, Elsevier, vol. 22(3), pages 192-212.
  38. Meen, Geoffrey & Andrew, Mark, 1998. "On the Aggregate Housing Market Implications of Labour Market Change," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(4), pages 393-419, September.
  39. Oikarinen, Elias, 2009. "Household borrowing and metropolitan housing price dynamics - Empirical evidence from Helsinki," Journal of Housing Economics, Elsevier, vol. 18(2), pages 126-139, June.
  40. Joshua Gallin, 2008. "The Long-Run Relationship Between House Prices and Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 635-658, December.
  41. Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
  42. Andersen, Henrik, 2011. "Procyclical implications of Basel II: Can the cyclicality of capital requirements be contained?," Journal of Financial Stability, Elsevier, vol. 7(3), pages 138-154, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:756. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (J Bruusgaard)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.