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Relationships between the finance system and housing markets

Piotr Lis
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Piotr Lis: Department of Economic and Local Government Policy, Poznan University of Economics

Working papers from Financialisation, Economy, Society & Sustainable Development (FESSUD) Project

Abstract: This study identifies the channels of impulse transmission from housing markets to the economy. Particular attention is paid to house prices, housing investments, the wealth effect and the financial accelerator. Furthermore, the author proves that the interior changes on the housing market occur earlier than the changes in the transactional prices of dwellings. This phenomenon results among all from the downward rigidity of prices. That is why, housing cycles should be identified as quantitative cycles rather than price cycles. In this approach, the author highlights the extended ascending phases of housing markets as particularly hazardous for the economy. Such extended ascending phases lead to abrupt and deep descending phases which, in turn, cause an economic slowdown and serious problems of the financial sector. Furthermore, the author of the study proves that financial markets cause the ascending phases of a housing cycle to extend. For that reason, this work offers an analysis of the development of the financial system in Europe conducted in comparison with global conditions, indication of the key determinants of this development, identification of housing investment finance mechanisms together with the assessment of the impact of these mechanisms on housing cycles. The sources of refinancing housing loans (mortgages) have been considered to be the main criterion differentiating the influence of the financial system on the housing sphere.

Keywords: housing; housing finance; housing policy; housing cycles; housing boom (search for similar items in EconPapers)
JEL-codes: R21 R28 R31 R38 G12 G21 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2015-02-01
New Economics Papers: this item is included in nep-cfn and nep-ure
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