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Banking integration and house price co-movement

Author

Listed:
  • Landier, Augustin
  • Sraer, David
  • Thesmar, David

Abstract

The correlation in house price growth across US states increased steadily between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first theoretically derive an appropriate measure of banking integration across state pairs and show that house price growth correlation is strongly related to this measure of financial integration. Our instrumental variable estimates suggest that banking integration can explain up to one-fourth of the rise in house price correlation over this period.

Suggested Citation

  • Landier, Augustin & Sraer, David & Thesmar, David, 2017. "Banking integration and house price co-movement," Journal of Financial Economics, Elsevier, vol. 125(1), pages 1-25.
    • Handle: RePEc:eee:jfinec:v:125:y:2017:i:1:p:1-25
    DOI: 10.1016/j.jfineco.2017.03.001
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial integration; Co-movement; House prices;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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