The Role of Market Imperfections in the Relationship between Housing Prices and Household Credit: Evidence from Taiwan

13 Pages Posted: 20 Nov 2013

See all articles by An-Pin Wei

An-Pin Wei

Sun Yat-sen University (SYSU) - International School of Business and Finance (ISBE)

Wei‐Ling Huang

affiliation not provided to SSRN

Chih‐Yuan Yang

Department of Civic Education and Leadership, National Taiwan Normal University, Taiwan 

Ming‐Chieh Wang

National Chi Nan University - Department of International Business Studies

Date Written: November 2013

Abstract

Given the credit market imperfections in Taiwan, this paper examines the threshold effects in the adjustment towards the long‐run equilibrium relationship between housing prices and household credit. The empirical findings verify the potential for regime shifts in the dynamically adjusted relationship between housing prices and household credit. Only when the benefits cover the cost of market imperfections, do housing and credit markets trigger convergence to their long‐run equilibrium. The hidden effect of the limitations on housing and credit markets is to raise the thresholds of the self‐adjustment mechanisms. As a result, economic boom‐bust cycles will be more severe and increase the fragility of financial sectors.

Suggested Citation

Wei, An-Pin and Huang, Wei‐Ling and Yang, Chih-Yuan and Wang, Ming‐Chieh, The Role of Market Imperfections in the Relationship between Housing Prices and Household Credit: Evidence from Taiwan (November 2013). Asian‐Pacific Economic Literature, Vol. 27, Issue 2, pp. 131-143, 2013, Available at SSRN: https://ssrn.com/abstract=2357139 or http://dx.doi.org/10.1111/apel.12022

An-Pin Wei (Contact Author)

Sun Yat-sen University (SYSU) - International School of Business and Finance (ISBE) ( email )

China

Wei‐Ling Huang

affiliation not provided to SSRN

No Address Available

Chih-Yuan Yang

Department of Civic Education and Leadership, National Taiwan Normal University, Taiwan 

No. 162, Section 1, Heping E. Rd.,
Taipei City, 10610
Taiwan

Ming‐Chieh Wang

National Chi Nan University - Department of International Business Studies ( email )

1, University Rd, Puli
Nantou 545
Taiwan

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