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Bank lending and property prices in Sweden

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Publication Details
Author list: Yazdanfar, Darush;Öhman, Peter
Publisher: Malmö University
Publication year: 2017
ISBN: 978-91-7104-782-3

Abstract

Purpose – The purpose of this study is to investigate the Granger causal link between bank lending and house prices. Design/methodology/approach – Several econometric methods, including Granger causality tests based on a vector error-correction model, were applied to analyse monthly time series data in the Swedish context. The data includes apartment prices, villa prices, bank lending, mortgage rates, and consumer price index for the period September 2005 to October 2013. Findings – The results show that bank lending and house prices are co-integrated. According to the Granger causality tests, bidirectional relationships exist between bank lending and each of apartment and villa prices, confirming the financial accelerator mechanism. Originality/value – As far as the authors know, this study represents the first analysis of the causal link between bank lending and the housing market in terms of apartment and villa prices in the Swedish context.


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