Mortgage Market Flexibility and the Transmission of House Price Shocks: A Multi-Country Study
23 Pages Posted: 29 Oct 2015
Date Written: September 2015
This paper assesses how the degree of the mortgage market flexibility alters the effect of a residential house price shock on household credit and GDP. We estimate a panel vector autoregression model for a sample of 16 OECD countries for the period 1985Q1-2012Q4 and we identify a house price shock as an increase in the innovation term of house prices unrelated to the contemporaneous changes in output and inflation. Our results do not support the hypothesis of a stronger household credit and GDP response to a house price shock in countries with a more flexible mortgage market.
Keywords: Household credit, house prices, mortgage market flexibility, panel vector autoregression
JEL Classification: C32, C33, E02, E21, E44, E51, G21, R21, R31
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