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Asymmetries in the interaction between housing prices and housing credit in Estonia

Juan Cuestas and Merike Kukk

No wp2017-2, Bank of Estonia Working Papers from Bank of Estonia

Abstract: This paper investigates the mutual dependence between housing prices and housing credit in Estonia, a country which experienced rapid debt accumulation during the 2000s and big swings in house prices during that period. We use Bayesian econometric methods on data spanning 2000–2015. The estimations show the interdependence between house prices and housing credit. More importantly, housing credit shocks had a stronger effect on house prices in the period of declining credit turnover. The asymmetry in the linkage between housing credit and house prices highlights important policy implications, in that if central banks increase capital buffers during good times, they can release credit conditions during hard times to alleviate the negative spillover into house prices and the real economy

Keywords: house prices; housing credit; credit cycle; asymmetries; Bayesian (search for similar items in EconPapers)
JEL-codes: E32 E44 E51 G21 R21 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-dcm, nep-mac, nep-tra and nep-ure
Date: 2017-05-25, Revised 2017-05-25
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Persistent link: https://EconPapers.repec.org/RePEc:eea:boewps:wp2017-2

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