 Housing booms and bank growthMark J. Flannery, Leming Lin and Luxi Wang Journal of Financial Intermediation, 2022, vol. 52, issue C Abstract: The rapid increase in U.S. house prices during the 2001–2006 period was accompanied by a historically rapid expansion of bank assets. We exploit cross-regional variation in local housing booms to study how housing demand shocks affected the growth of the banking sector. We estimate the effect of housing demand shocks that are orthogonal to observed non-housing demand shocks and credit supply shocks in each bank’s market area. We employ several instrumental variables that plausibly identify variation in local housing demand that is exogenous to local banks. We find that the housing boom had a large effect on bank asset growth—the cross-regional elasticity of bank growth with respect to housing demand shocks is around 0.6. The regional elasticity estimate suggests that housing demand shocks can potentially account for a large fraction of the growth of the banking sector during this period. Keywords: Bank growth; Credit supply; Great Recession; Housing demand; House prices; Mortgage demand (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:jfinin:v:52:y:2022:i:c:s1042957322000468 DOI: 10.1016/j.jfi.2022.100993 Access Statistics for this article Journal of Financial Intermediation is currently edited by Elu von Thadden More articles in Journal of Financial Intermediation from Elsevier |
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