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Modelling Household Mortgage Debt: the case of the Czech Republic

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  • Lukáš Fiala

Abstract

This paper deals with Czech household mortgage debt and its determinants in the period 1Q2005-2Q2021. Our analysis focuses on the variables determining the level of mortgage debt from both short- and long-term perspectives. Our contribution is two-fold. Firstly, we examine the relationship between the selected variables within a cross-correlation analysis. The results confirm the positive dependency of household mortgage debt and real GDP, real gross average income and the level of house prices. By contrast, a negative relationship was identified for real interest rates, the unemployment rate and the inflation rate. Secondly, we explore the ARDL and EC models and identify one cointegration relationship. Our results confirm that house prices and real wages are determinants of household mortgage debt in the long-term perspective. However, a wider range of variables plays a role in the short run, including house prices, real gross average income, inflation and long-term interest rates. Moreover, our model indicates the insignificance of unemployment in both the short and long run.

Suggested Citation

  • Lukáš Fiala, 2022. "Modelling Household Mortgage Debt: the case of the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2022(6), pages 443-463.
    • Handle: RePEc:prg:jnlpep:v:2022:y:2022:i:6:id:816:p:443-463
    DOI: 10.18267/j.pep.816
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    References listed on IDEAS

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    More about this item

    Keywords

    Mortgage debt; household debt; cointegration; ARDL model;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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