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Real Estate Soars and Financial Crises: Recent Stories

Author

Listed:
  • Hanwool Jang

    (Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology (KAIST), Daejeon 34141, Korea)

  • Yena Song

    (Department of Geography, Chonnam National University, Gwangju 61186, Korea)

  • Sungbin Sohn

    (HSBC Business School, Peking University, Shenzhen 518055, China)

  • Kwangwon Ahn

    (Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology (KAIST), Daejeon 34141, Korea)

Abstract

This paper studies the contribution of real estate bubble to a financial crisis. First, we document symptoms of a real estate bubble along with a slowdown of the real economy and find indicators of an imminent crash of the stock market, triggering a sense of déjà vu from the 2008 crisis. However, we show that the relationship between real estate and financial markets has changed since the crisis. The empirical analyses provide evidence that the monetary policy has recovered its control over mortgage rates, which had been lost prior to the global financial crisis, and that the real estate market does not have a Granger causality relationship with the stock market any more. Findings suggest that an imminent financial market crash is not likely to be catalyzed by a real estate bubble.

Suggested Citation

  • Hanwool Jang & Yena Song & Sungbin Sohn & Kwangwon Ahn, 2018. "Real Estate Soars and Financial Crises: Recent Stories," Sustainability, MDPI, vol. 10(12), pages 1-12, December.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:12:p:4559-:d:187353
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    References listed on IDEAS

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