Real Estate Cycles and Bank Systemic Risks

37 Pages Posted: 27 Aug 2016

See all articles by Georgina Ge

Georgina Ge

Macquarie University, College of Commerce, Division of Economic and Financial Studies, Department of Economics, Students

Egon Kalotay

Macquarie University, Macquarie Business School

Thomas Longden

Macquarie University, Macquarie Business School; CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Geoffrey Loudon

Macquarie University

Stefan Trück

Macquarie University Sydney - Department of Applied Finance and Actuarial Studies; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR); Macquarie University, Macquarie Business School

Date Written: May 13, 2016

Abstract

We present an empirical model of systemic banking crises from an Australian perspective. Having no history of domestic banking crises in recent history, our quantitative model is estimated using an international panel data set spanning 18 countries and 30 years of observations. We evaluate in a hazard-modeling framework the statistical and economic significance of variables that have been suggested by prior theoretical and empirical studies to be antecedents of banking crises, such as: measures of real estate price exuberance, asset returns and the growth of leverage. In quantifying the exposure of the banking system to real estate pricing, we identify dynamics consistent with ‘boom-bust cycles’ or bubble-like behaviour in the housing market. More generally, our findings yield measures of crisis risk exposure, but perhaps more importantly, guidance with respect to the variables that most influence crisis risk exposure.

Suggested Citation

Ge, Chanyuan and Kalotay, Egon and Longden, Thomas and Loudon, Geoffrey and Trueck, Stefan, Real Estate Cycles and Bank Systemic Risks (May 13, 2016). CIFR Paper No. 120/2016. Available at SSRN: https://ssrn.com/abstract=2830280 or http://dx.doi.org/10.2139/ssrn.2830280

Chanyuan Ge

Macquarie University, College of Commerce, Division of Economic and Financial Studies, Department of Economics, Students ( email )

Sydney
Australia

Egon Kalotay (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Thomas Longden

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici ( email )

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Geoffrey Loudon

Macquarie University ( email )

New South Wales 2109
Australia

Stefan Trueck

Macquarie University Sydney - Department of Applied Finance and Actuarial Studies ( email )

North Ryde
Sydney, New South Wales 2109
Australia
61298508483 (Phone)
61298508483 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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