 The 2007 financial crisis and the UK residential housing market: Did the relationship between interest rates and house prices change?Chin-Bun Tse, Timothy Rodgers and Jacek Niklewski Economic Modelling, 2014, vol. 37, issue C, 518-530 Abstract: This paper investigates the impact of the 2007 financial crisis on the relationship between real mortgage interest rates and real house prices. It applies a dynamic conditional correlation based methodology that uses fractionally differenced data along with controls for structural breaks and non-interest-rate related factors that influence house prices. The key finding made is that the financial crisis had a long-term structural impact on the monetary transmission relationship. For example, we find that the mean conditional correlation between house prices in England and Wales and the three-year fixed mortgage rate rose by 6.6 percentage points. Similarly, the mean correlation between prices and the standard variable mortgage rate increased 6.4 percentage points to 54%. These findings suggest to us that interest-rate-based monetary policy still has an important role to play in the housing market. Keywords: Financial crisis; Residential housing market; Conditional correlation; Transmission mechanism (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:37:y:2014:i:c:p:518-530 DOI: 10.1016/j.econmod.2013.08.013 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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