House Prices and the Credit-Driven Household Demand Channel: The Case of the Irish Economy
David Cronin and
Kieran Mc Quinn ()
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Kieran Mc Quinn: Economic and Social Research Institute (ESRI)
Authors registered in the RePEc Author Service: Kieran McQuinn ()
Credit and Capital Markets, 2021, vol. 54, issue 2, 199-221
The performance of the Irish economy stands out across western economies over the past two decades as the later years of its â€œCeltic Tigerâ€ phase gave way to a sharp and extremely large economic downturn between 2008 and 2012. This severe recession has been followed by a Lazarus-style economic recovery in recent years. This paper examines the role played by the credit-driven housing net worth channel in the path that Irish economic performance has taken between 2002 and 2019 by specific reference to developments in the domestic labour market. We find a significant positive relationship between housing net worth and employment growth in Ireland, manifesting itself through the non-traded sector of the economy between 2007 and 2012. This followed the emergence and then bursting of a substantial credit-fuelled housing market bubble in the Irish residential property market. Our analysis indicates no evident link between economic activity and a credit-driven housing net worth channel in recent years. This may reflect market and regulatory responses to the banking crisis-led recession of the late 2000s and early 2010s.
Keywords: Household Wealth; House Prices; Employment (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kuk:journl:v:54:y:2021:i:2:p:199-221
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