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The Interaction between Mortgage Financing and Housing Prices in Greece

Sophocles Brissimis () and Thomas Vlassopoulos

No 58, Working Papers from Bank of Greece

Abstract: Although the close empirical relationship between the evolution of mortgage lending and housing prices is well established in the literature, the direction of causation is less clear from a theoretical standpoint. We apply multivariate cointegration techniques in order to address this issue empirically for the Greek economy. Our results, based on a cointegration relationship that we identify as a mortgage loan demand equation, indicate that housing prices do not adjust to disequilibria in the market for housing loans. This suggests that in the long run the causation does not run from mortgage lending to housing prices. In the short run we find evidence of a contemporaneous bi-directional dependence.

Keywords: Housing loans; Housing prices; Multivariate cointegration (search for similar items in EconPapers)
JEL-codes: G21 R21 C32 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-03
New Economics Papers: this item is included in nep-eec, nep-geo and nep-ure
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Journal Article: The Interaction between Mortgage Financing and Housing Prices in Greece (2009) Downloads
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