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Self-reinforcing effects between housing prices and credit: Evidence from Norway

Andre Anundsen () and Eilev Jansen ()

No 13/2011, Memorandum from Oslo University, Department of Economics

Abstract: The interaction between housing prices and household borrowing in Norway is estimated in a simultaneous setting in the long and the short run.The long run dependence is analyzed within a cointegrated vector autoregression in real housing prices, real disposable household income and real household debt, conditioning on the real after tax interest rate, the number of house transactions and the volume of housing capital. We identify two cointegrating equations which determine equilibrium housing prices and household debt, respectively. The long run equations are embedded in a system of two error-correction equations which is estimated simultaneously. The model yields meaningful short and long term effects when estimated on the sample 1986q2-2008q4 and impulse responses demonstrate that there are selfreinforcing feedback effects between the two variables of interest.

Keywords: Housing prices; household borrowing; financial accelerator (search for similar items in EconPapers)
JEL-codes: C32 C52 E44 G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-ure
Date: 2011-04-28
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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