Abstract

http://ssrn.com/abstract=1991430
 
 

References (27)



 
 

Citations (1)



 


 



Financial Integration, Housing and Economic Volatility


Elena Loutskina


University of Virginia - Darden School of Business

Philip E. Strahan


Boston College - Department of Finance; National Bureau of Economic Research (NBER)

November 9, 2011


Abstract:     
The Financial Crisis and the Great Recession that followed illustrate the sensitivity of the economy to a housing bust. This paper shows that financial integration both amplified the volatility of housing prices and economic sensitivity to housing-price shocks. We exploit variation credit-supply subsidies across local markets from the Government-Sponsored Enterprises to construct an instrument for housing price changes unrelated to fundamentals. Using this instrument, we find that a 1% rise in housing prices causes a 0.25% increase in economic growth. This effect is larger in localities more financially integrated with other markets through bank ownership ties. Financial integration thus raised the effect of collateral shocks on the economy, thereby increasing economic volatility.

Number of Pages in PDF File: 41

working papers series


Download This Paper

Date posted: January 25, 2012  

Suggested Citation

Loutskina, Elena and Strahan, Philip E., Financial Integration, Housing and Economic Volatility (November 9, 2011). Available at SSRN: http://ssrn.com/abstract=1991430 or http://dx.doi.org/10.2139/ssrn.1991430

Contact Information

Elena Loutskina (Contact Author)
University of Virginia - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-243-4031 (Phone)
Philip E. Strahan
Boston College - Department of Finance ( email )
Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-6430 (Phone)
617-552-0431 (Fax)
HOME PAGE: http://www2.bc.edu/~strahan
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,230
Downloads: 242
Download Rank: 72,758
References:  27
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.453 seconds