Mortgage market flexibility and the transmission of house price shocks: a multi-country study

Peter Reusens

No 510715, Working Papers of Department of Decision Sciences and Information Management, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Decision Sciences and Information Management, Leuven

Abstract: This paper assesses how the degree of the mortgage market flexibility alters the effect of a residential house price shock on household credit and GDP. We estimate a panel vector autoregression model for a sample of 16 OECD countries for the period 1985Q1-2012Q4 and we identify a house price shock as an increase in the innovation term of house prices unrelated to the contemporaneous changes in output and inflation. Our results do not support the hypothesis of a stronger household credit and GDP response to a house price shock in countries with a more flexible mortgage market.

Keywords: Household credit; House prices; Mortgage market flexibility; Panel vector autoregression (search for similar items in EconPapers)
Date: 2015
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Published in FEB Research Report KBI_1525

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