Credit, housing prices, expectations, and the macroeconomy. Evidence from developed and developing countries

Abstract

The interlinkages between housing and credit markets can be critical for financial and overall macroeconomic stability. This paper empirically examines the impact of housing prices and expectations on debt buildups. These linkages are analyzed for a set of 41 countries that includes 28 developed and 13 developing countries using dynamic panel estimation over the sample period from 1997:Q1 to 2020:Q1. The findings indicate that the amount of credit generated in an economy is significantly related to housing and equity prices (indicators of sentiments and expectations) in developed and developing economies.

Keywords

• expectations
• housing prices
• macro economy
• equity prices
• mortgages