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Real Estate Soars and Financial Crises: Recent Stories

Hanwool Jang (), Yena Song (), Sungbin Sohn () and Kwangwon Ahn ()
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Hanwool Jang: Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology (KAIST), Daejeon 34141, Korea
Yena Song: Department of Geography, Chonnam National University, Gwangju 61186, Korea
Sungbin Sohn: HSBC Business School, Peking University, Shenzhen 518055, China
Kwangwon Ahn: Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology (KAIST), Daejeon 34141, Korea

Sustainability, 2018, vol. 10, issue 12, 1-12

Abstract: This paper studies the contribution of real estate bubble to a financial crisis. First, we document symptoms of a real estate bubble along with a slowdown of the real economy and find indicators of an imminent crash of the stock market, triggering a sense of déjà vu from the 2008 crisis. However, we show that the relationship between real estate and financial markets has changed since the crisis. The empirical analyses provide evidence that the monetary policy has recovered its control over mortgage rates, which had been lost prior to the global financial crisis, and that the real estate market does not have a Granger causality relationship with the stock market any more. Findings suggest that an imminent financial market crash is not likely to be catalyzed by a real estate bubble.

Keywords: financial crash; real estate bubble; stock market (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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