The Interaction between Mortgage Financing and Housing Prices in Greece

Although the close empirical relationship between the evolution of mortgage lending and housing prices is well established in the literature, the direction of causation is less clear from a theoretical standpoint. We apply multivariate cointegration techniques in order to address this issue empirica...

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Bibliographic Details
Published in:The journal of real estate finance and economics 2009-08, Vol.39 (2), p.146-164
Main Authors: Brissimis, Sophocles N., Vlassopoulos, Thomas
Format: Article
Language:English
Subjects:
Borrowing
Causality
Cointegration
Cointegration analysis
Collateral
Consumption
Deregulation
Economic activity
Economics
Economics and Finance
Finance
Financial Services
Greece
Growth rate
Home financing
Housing
Housing prices
Loans
Monetary policy
Mortgages
Real estate
Real estate financing
Regional/Spatial Science
Studies
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Summary:Although the close empirical relationship between the evolution of mortgage lending and housing prices is well established in the literature, the direction of causation is less clear from a theoretical standpoint. We apply multivariate cointegration techniques in order to address this issue empirically for the Greek economy. Our results, based on a cointegration relationship that we identify as a mortgage loan demand equation, indicate that housing prices do not adjust to disequilibria in the market for housing loans. This suggests that in the long run the causation does not run from mortgage lending to housing prices. In the short run we find evidence of a contemporaneous bi-directional dependence.
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-008-9109-3