Money and credit during normal times and house price booms: evidence from time-frequency analysis
Maciej Ryczkowski ()
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Maciej Ryczkowski: Nicolaus Copernicus University in Toruń
Empirica, 2020, vol. 47, issue 4, No 5, 835-861
Abstract I analyse the link between money and credit for twelve industrialized countries in the time period from 1970 to 2016. The euro area and Commonwealth Countries have rather strong co-movements between money and credit at longer frequencies. Denmark and Switzerland show weak and episodic effects. Scandinavian countries and the US are somewhere in between. I find strong and significant longer run co-movements especially around booming house prices for all of the sample countries. The analysis suggests the expansionary policy that cleans up after the burst of a bubble may exacerbate the risk of a new house price boom. The interrelation is hidden in the short run, because the co-movements are then rarely statistically significant. According to the wavelet evidence, developments of money and credit since the Great Recession or their decoupling in Japan suggest that it is more appropriate to examine the two variables separately in some circumstances.
Keywords: Money and credit; House prices; Historical co-movements; Wavelets (search for similar items in EconPapers)
JEL-codes: C22 E31 E32 E44 E50 R31 (search for similar items in EconPapers)
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