NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What Explains House Price Booms?: History and Empirical Evidence.

Michael D. Bordo, John Landon-Lane

NBER Working Paper No. 19584
Issued in October 2013
NBER Program(s):   DAE   ME

In this paper we investigate the relationship between loose monetary policy, low inflation, and easy bank credit with house price booms. Using a panel of 11 OECD countries from 1920 to 2011 we estimate a panel VAR in order to identify shocks that can be interpreted as loose monetary policy shocks, low inflation shocks, bank credit shocks and house price shocks. We show that loose monetary policy played an important role in housing booms along with the other shocks. We show that during boom periods there is a heightened impact of all three "policy" shocks with the bank credit shock playing an important role. However, when we look at individual house price boom episodes the cause of the price boom is not so clear. The evidence suggests that the house price boom that occurred in the US during the 1990s and 2000s was not due to easy bank credit. Loose monetary policy (as well as low inflation) played some role but the residual which may be picking up other factors such as financial innovation and the shadow banking system is the most important shock. This result is robust to many alternative specifications.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19584

Published: Michael D. Bordo , John Landon-Lane (2014), What Explains House Price Booms? History and Empirical Evidence, in Georgios P. Kouretas , Athanasios P. Papadopoulos (ed.) Macroeconomic Analysis and International Finance (International Symposia in Economic Theory and Econometrics, Volume 23) Emerald Group Publishing Limited, pp.1 - 36

Users who downloaded this paper also downloaded these:
Bordo and Landon-Lane w19585 Does Expansionary Monetary Policy Cause Asset Price Booms; Some Historical and Empirical Evidence
Liebman and Mahoney w19481 Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement
Accominotti and Eichengreen w19580 The Mother of All Sudden Stops: Capital Flows and Reversals in Europe, 1919-32
Lochner, Stinebrickner, and Suleymanoglu w19716 The Importance of Financial Resources for Student Loan Repayment
Adam, Kuang, and Marcet w17224 House Price Booms and the Current Account
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us