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Asymmetries in the interaction between housing prices and housing credit in Estonia

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  • Juan Carlos Cuestas
  • Merike Kukk

Abstract

This paper investigates the mutual dependence between housing prices and housing credit in Estonia, a country which experienced rapid debt accumulation during the 2000s and big swings in house prices during that period. We use Bayesian econometric methods on data spanning 2000–2015. The estimations show the interdependence between house prices and housing credit. More importantly, housing credit shocks had a stronger effect on house prices in the period of declining credit turnover. The asymmetry in the linkage between housing credit and house prices highlights important policy implications, in that if central banks increase capital buffers during good times, they can release credit conditions during hard times to alleviate the negative spillover into house prices and the real economy

Suggested Citation

  • Juan Carlos Cuestas & Merike Kukk, 2017. "Asymmetries in the interaction between housing prices and housing credit in Estonia," Bank of Estonia Working Papers wp2017-2, Bank of Estonia, revised 25 May 2017.
    • Handle: RePEc:eea:boewps:wp2017-2
    DOI: 10.23656/25045520/22017/0140
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    More about this item

    Keywords

    house prices; housing credit; credit cycle; asymmetries; Bayesian;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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