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Credit, House Prices and the Macroeconomy in Cyprus

Lena T. Cleanthous, Elena C. Eracleous and Nektarios A. Michail
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Lena T. Cleanthous: Central Bank of Cyprus
Elena C. Eracleous: University of Cyprus
Nektarios A. Michail: Central Bank of Cyprus

South-Eastern Europe Journal of Economics, 2019, vol. 17, issue 1, 33-55

Abstract: This paper examines whether there is a link between house prices, credit and macroeconomic conditions in Cyprus, using a vector error correction model (VECM) and quarterly data from 2005Q4 to 2016Q4. Overall, the results suggest that a link does exist and that house prices have a bi-directional relationship with loans and unemployment rates. Macroeconomic conditions matter for Cyprus economy as an unexpected shock in unemployment has been found to have a persistent impact on all model variables. Interest rates have also been found to have an effect on wages and house prices.

Keywords: Credit; House Prices; VECM; Cyprus (search for similar items in EconPapers)
JEL-codes: E44 E50 R20 (search for similar items in EconPapers)
Date: 2019
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