The interaction between house prices and loans for house purchase. The Spanish case

Ricardo Gimeno and Carmen Martínez-Carrascal ()
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Carmen Martínez-Carrascal: Banco de España
Authors registered in the RePEc Author Service: Carmen Martinez Carrascal

No 605, Working Papers from Banco de España

Abstract: The aim of this paper is to analyse, using a vector error-correction model (VECM), the dynamic interaction between house prices and loans for house purchase in Spain. The results show that both variables are interdependent in the long run: loans for house purchase depend positively on house prices, while house prices adjust when this credit aggregate departs from the level implied by its long-run determinants. In contrast, disequilibria in house prices are corrected only through changes in this variable. As for short-run dynamics, the results show that the two variables have a positive contemporaneous impact on each other, indicating the existence of mutally reinforcing cycles in both variables.

Keywords: mortgage debt; housing prices; error correction (search for similar items in EconPapers)
JEL-codes: E32 G21 R21 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2006-02
New Economics Papers: this item is included in nep-eec, nep-geo, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0605

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