Banking Integration and House Price Comovement

Landier, Augustin; Sraer, David Alexandre; Thesmar, David

Banking Integration and House Price Comovement

CEPR Discussion Paper No. DP10295

Posted: 23 Jan 2015

See all articles by Augustin Landier

David Alexandre Sraer

University of California, Berkeley; Princeton University

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

There are 3 versions of this paper

Date Written: December 2014

Abstract

The correlation across US states in house price growth increased steadily between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first theoretically derive an appropriate measure of banking integration across state pairs and document that house price growth correlation is strongly related to this measure of financial integration. Our IV estimates suggest that banking integration can explain up to one third of the rise in house price correlation over the period.

Keywords: banking deregulation, comovement, real estate

JEL Classification: G10, G21, R30

Suggested Citation: Suggested Citation

Landier, Augustin and Sraer, David Alexandre and Thesmar, David, Banking Integration and House Price Comovement (December 2014). CEPR Discussion Paper No. DP10295. Available at SSRN: https://ssrn.com/abstract=2554370