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Banking Deregulation and The Rise in House Price Comovement

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Listed author(s):
  • Landier, Augustin
  • Sraer, David
  • Thesmar, David

Abstract

This paper documents a steady increase in the average correlation of house price growth across US states over the 1976-2006 period and shows that this phenomenon can be explained in large part by the geographic integration of the banking market over this period. We theoretically derive an appropriate measure of banking integration across state pairs and document that the cross section of state pair correlations is strongly related to this measure of financial integration. We then use bilateral cross state banking deregulations to instrument banking integration of a state pair. Using our IV estimates, we find that financial integration of the US banking market explains about 25% of the rise of the average home price correlation over the period.

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File URL: http://idei.fr/sites/default/files/medias/doc/by/landier/correlation.pdf
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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 13-437.

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Date of creation: Mar 2013
Handle: RePEc:tse:wpaper:27662
Contact details of provider: Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/

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  1. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, 05.
  2. Manuel Adelino & Antoinette Schoar & Felipe Severino, 2012. "Credit Supply and House Prices: Evidence from Mortgage Market Segmentation," NBER Working Papers 17832, National Bureau of Economic Research, Inc.
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Cited by:

  1. Füss, Roland & Zietz, Joachim, 2016. "The economic drivers of differences in house price inflation rates across MSAs," Journal of Housing Economics, Elsevier, vol. 31(C), pages 35-53.
  2. Rubén Hernández-Murillo & Michael T Owyang & Margarita Rubio, 2013. "Clustered Housing Cycles," Discussion Papers 2013/02, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  3. S. Avouyi-Dovi & C. Labonne & R. Lecat & S. Ray, 2017. "Insight from a Time-Varying VAR Model with Stochastic Volatility of the French Housing and Credit Markets," Working papers 620, Banque de France.

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