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Bank credit and the housing market in OECD countries

Philip Arestis and Ana González

Journal of Post Keynesian Economics, 2014, vol. 36, issue 3, 467-490

Abstract: Relevant economic literature frequently focuses on the impact of credit shocks on housing prices. The macroeconomic doctrine of the new consensus macroeconomics completely ignores bank credit. However, the Great Recession has highlighted the importance of bank credit. The purpose of this article is to revisit this important macroeconomic variable. Consequently, we propose to endogenize the volume of bank credit by paying special attention to those variables that are related to the real estate market, which can be considered as key to the evolution of bank credit. Our theoretical hypothesis is tested by means of a sample of nine economies of the Organization for Economic Cooperation and Development (OECD) from 1970 to 2011. For this purpose, we apply the cointegration technique, which permits the modeling of the long-run equilibrium relationship and the short-run dynamics along with an error-correction term.

Date: 2014
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