Betting the house
Oscar Jorda,
Moritz Schularick and
Alan Taylor
Journal of International Economics, 2015, vol. 96, issue S1, S2-S18
Abstract:
Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140years of modern economic history in the advanced economies. We exploit the implications of the macroeconomic policy trilemma to identify exogenous variation in monetary conditions: countries with fixed exchange regimes often see fluctuations in short-term interest rates unrelated to home economic conditions. We use novel instrumental variable local projection methods to demonstrate that loose monetary conditions lead to booms in real estate lending and house prices' bubbles; these, in turn, materially heighten the risk of financial crises. Both effects have become stronger in the postwar era.
Keywords: Financial crises; Monetary policy; Leverage; Credit; House prices; Local projections (search for similar items in EconPapers)
JEL-codes: C14 C38 E32 E37 E42 E44 E51 E52 F41 G01 G21 N10 N20 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (157)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199614001561
Full text for ScienceDirect subscribers only
Related works:
Chapter: Betting the House (2014)
Working Paper: Betting the House (2014) 
Working Paper: Betting the House (2014) 
Working Paper: Betting the House (2014) 
Working Paper: Betting the House (2014) 
Working Paper: Betting the House (2014) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:96:y:2015:i:s1:p:s2-s18
DOI: 10.1016/j.jinteco.2014.12.011
Access Statistics for this article
Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés
More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().