House Prices, Money, Credit and the Macroeconomy

45 Pages Posted: 7 May 2008

See all articles by Charles Goodhart

Charles Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department

Multiple version iconThere are 2 versions of this paper

Date Written: April 2008

Abstract

This paper assesses the linkages between money, credit, house prices and economic activity in industrialised countries over the last three decades. The analysis is based on a fixed-effects panel VAR estimated using quarterly data for 17 industrialized countries spanning the period 1970-2006. The main results of the analysis are the following: (i) There is evidence of a significant multidirectional link between house prices, monetary variables and the macroeconomy. (ii) The link between house prices and monetary variables is found to be stronger over a more recent sub-sample from 1985 till 2006. (iii) The effects of shocks to money and credit are found to be stronger when house prices are booming. The last two results are, however, in general not statistically significant due to the large confidence bands of the impulse responses.

Keywords: House prices, wealth effects, collateral, financial liberalisation, money and credit

JEL Classification: E21, E22, E31, E32, E44, E47, E50, R21, R31

Suggested Citation

Goodhart, Charles A.E. and Hofmann, Boris, House Prices, Money, Credit and the Macroeconomy (April 2008). ECB Working Paper No. 888, Available at SSRN: https://ssrn.com/abstract=1120162 or http://dx.doi.org/10.2139/ssrn.1120162

Charles A.E. Goodhart (Contact Author)

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom
0207 955 7555 (Phone)
0207 242 1006 (Fax)

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
340
Abstract Views
1,814
rank
125,219
PlumX Metrics