Banking Deregulation and The Rise in House Price Comovement

Augustin Landier, David Sraer and David Thesmar

No 13-437, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: This paper documents a steady increase in the average correlation of house price growth across US states over the 1976-2006 period and shows that this phenomenon can be explained in large part by the geographic integration of the banking market over this period. We theoretically derive an appropriate measure of banking integration across state pairs and document that the cross section of state pair correlations is strongly related to this measure of financial integration. We then use bilateral cross state banking deregulations to instrument banking integration of a state pair. Using our IV estimates, we find that financial integration of the US banking market explains about 25% of the rise of the average home price correlation over the period.

Date: 2013-03
New Economics Papers: this item is included in nep-ban, nep-cba and nep-ure
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Citations: View citations in EconPapers (5)

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Working Paper: Banking Deregulation and The Rise in House Price Comovement (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:27662

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