The Interaction between Mortgage Financing and Housing Prices in Greece |
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| Authors: | Sophocles N Brissimis Thomas Vlassopoulos |
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| Institution: | (1) Economic Research Department, Bank of Greece, 21 El. Venizelos Ave., Athens, 102 50, Greece;(2) Department of Economics, University of Piraeus, Piraeus, Greece |
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| Abstract: | 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.
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| Keywords: | Housing loans Housing prices Multivariate cointegration |
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