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The interaction between housing prices and housing credit: evidence from a country with rapid credit accumulation

Author

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  • Juan Carlos Cuestas
  • Merike Kukk

Abstract

Purpose - This paper aims to investigate the mutual dependence between housing prices and housing credit in Estonia, a country that experienced rapid debt accumulation during the 2000s and big swings in house prices during that period. Design/methodology/approach - The authors use Bayesian econometric methods on data spanning 2000–2015. Findings - The estimations show the interdependence between house prices and housing credit. More importantly, negative housing credit innovations had a stronger effect on house prices than positive ones. Originality/value - 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, 2020. "The interaction between housing prices and housing credit: evidence from a country with rapid credit accumulation," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(1), pages 191-209, May.
    • Handle: RePEc:eme:jespps:jes-11-2019-0519
    DOI: 10.1108/JES-11-2019-0519
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    Citations

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    Cited by:

    1. Merike Kukk, 2023. "What are the triggers for arrears on debt over a business cycle? Evidence from panel data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2811-2833, July.
    2. Mohsen Bahmani-Oskooee & Hesam Ghodsi & Muris Hadzic, 2021. "On the Link between House Prices and House Permits: Asymmetric Evidence from 51 States of the United States of America," International Real Estate Review, Global Social Science Institute, vol. 24(3), pages 323-361.
    3. Estefanía Mourelle & Juan Carlos Cuestas, 2022. "Investment dynamics in Central and Eastern Europe: Why doesn’t the sun always rise from the east?," Working Papers 2022/02, Economics Department, Universitat Jaume I, Castellón (Spain).

    More about this item

    Keywords

    House prices; Housing credit; Credit cycle; Asymmetries; Bayesian; E32; E44; E51; G21; R21; R31;
    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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