Integration of Mortgage and Capital Markets: Evidence in the Spanish Case

Abstract

The spectacular development of the Spanish mortgage market during the last decade has increased the concern about its financial integration with other capital markets. This paper examines the degree of integration between the mortgage market and two broader capital markets such as the public debt market and the money market in the Spanish case. With this purpose, different time series techniques in a context of cointegration have been used.

The results obtained reveal that there exists an important degree of integration between the mortgage market and the general capital markets in Spain. In particular, the public debt market and, especially, the money market have turned into essential references for the mortgage market though the linkage with the mortgage market is stronger for the money market, possibly due to the peculiar structure of the Spanish mortgage market.

Keywords: integration, mortgage market, capital markets, cointegration

JEL Classification: E40, E44, G10