A Structural Model for the Housing and Credit Markets in Italy

46 Pages Posted: 2 Dec 2012

Date Written: October 26, 2012

Abstract

We estimate a fully-fledged structural system for the housing market in Italy, taking into account the multi-fold link with bank lending to both households and construction firms. The model allows the house supply to vary in the short run and the banking sector to affect the equilibrium in the housing market, through its effect on housing supply and demand. We show that house prices react mostly to standard drivers such as disposable income, expected inflation and demographic pressures. Lending conditions also have a significant impact, especially through their effects on mortgage loans, and consequently on housing demand. Allowing short-run adjustment in house supply implies a weaker response of house prices to a change in the monetary stance or in banks’ deleveraging process. Finally, we find that since the mid-eighties house price developments in Italy have been broadly in line with the fundamentals; during the recent financial crisis, the worsening in credit supply conditions dampened house price dynamics, partly offsetting the positive stimulus provided by the easing of the monetary policy stance.

Keywords: house prices, credit, system of simultaneous equations

JEL Classification: E51, E52, G21

Suggested Citation

Nobili, Andrea and Zollino, Francesco, A Structural Model for the Housing and Credit Markets in Italy (October 26, 2012). Bank of Italy Temi di Discussione (Working Paper) No. 887, Available at SSRN: https://ssrn.com/abstract=2182618 or http://dx.doi.org/10.2139/ssrn.2182618

Andrea Nobili (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Francesco Zollino

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
92
Abstract Views
882
rank
314,785
PlumX Metrics