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The relationship between house prices and house purchase loans: The Spanish case

Ricardo Gimeno and Martí­nez-Carrascal, Carmen
Authors registered in the RePEc Author Service: Carmen Martinez Carrascal

Journal of Banking & Finance, 2010, vol. 34, issue 8, 1849-1855

Abstract: This paper looks at recent developments in house purchase loans and house prices in Spain and the linkages between them. It aims at identifying deviations of these variables from their equilibrium levels, and for this purpose, we estimate a vector error-correction model. The results show that both variables are interdependent in the long-run and that both variables were above their equilibrium level by the end of the sample period (2009:Q1). The paper also offers insight into how overvaluation (overindebtedness) in house prices can lead to a false sense of no overindebtedness (house prices overvaluation).

Keywords: Mortgage; debt; House; prices; Error; correction (search for similar items in EconPapers)
Date: 2010
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