Mortgages and Credit Cycle Divergence in Eurozone Economies

Dirk Bezemer, Anna Samarina and Lu Zhang
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Lu Zhang: University of Groningen

No 15021-GEM, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)

Abstract: The dynamics of household mortgage credit and loans to non-financial busi-ness have diverged significantly in recent decades. In this paper we constructand describe credit cycles for total bank credit, household mortgages and non-financial business loans for 14 EMU economies over 1990–2013. We explorethe cross-country coherence of credit gaps measured by synchronicity of move-ments and similarity of amplitudes, and analyze correlates of credit cycle coher-ence. Two findings stand out. As household mortgage credit assumes a largershare in total credit, credit cycle coherence across EMU economies decreases.EMU membership is associated with convergence of business credit cycles butdivergence of household mortgage credit cycles. These findings survive a bat-tery of sensitivity checks. We discuss implications for monetary policy.

Date: 2015
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