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Paper eres2014_135:
The role of liquidity shocks in the housing market

id eres2014_135
authors Taltavull de La Paz, Paloma; Michael White
year 2014
title The role of liquidity shocks in the housing market
source 21st Annual European Real Estate Society Conference in Bucharest, Romania
summary In a previous paper (Taltavull and White, 2012) we analysed the role of money supply, migration and mortgage finance in house price evolution. Using a VECM framework we examined these variables together with income, inflation, and interest rates for both Spain and the UK. The results indicated an important role for income, mortgages and migration in UK house price movements, more so than in Spain. Financial deregulation, and increasing monetary integration have been the background against which flows of liquidity have increased. Increasing interbank flows have also linked markets in different countries providing increased liquidity that can impact the mortgage market. Traditionally, monetary policy used interest rate changes to affect GDP. However this policy tool impacts asymmetrically in Eurozone economies and is generally constrained by the highly internationally interconnected money market. In this paper we build upon our previous work and focus on the role that changes in liquidity have played in the evolution of house prices. In doing this we identify the main channels of transmission affecting the housing market. In addition we also consider how the housing market, being impacted by increased liquidity can also feedback to aggregate money supply. The models tested examine Spain and the UK and identify short run and permanent effects in the relationship between liquidity and house prices.
series ERES:conference
email paloma@ua.es
more http://library.eres.org/cgi-bin/rsa98.pl?conf=ERES2014&type=session&theme=D &slot=2710
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ratings
session D : Housing Markets & Economics
last changed 2014/10/21 21:51
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