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The credit channel, liquidity and house prices: Evidence from UK and Spanish housing markets

Paloma Taltavull de La Paz () and Michael White

ERES from European Real Estate Society (ERES)

Abstract: Increases in mortgage lending, lower interest rates and increasing liquidity are considered to have caused house price increases. In this paper we test price behaviour focusing on the credit channel as a transmission mechanism for Monetary Policy. We examine the interaction between the housing market, the financial sector, and the macroeconomy both nationally and regionally, drawing comparisons between outcomes across the two countries. We find empirical evidence suggesting that liquidity effects are stronger in those regions where housing demand is stronger but not in others. Regional analysis shows how the effect of fundamental variables are concentrated in some but not all regions and suggests that the bubble in house prices could be spatially disaggregated.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2012-01-01
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