Bank Lending and Property Prices in Hong Kong

Abstract

This paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy can not be used to guard against asset price swings. Third, despite the collapse in property prices since 1998, the banking sector remains sound. While the contemporaneous correlation between lending and property prices is large, our results suggest that the direction of influence goes from property prices to bank credit rather than conversely.Property prices, bank lending, Hong Kong

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Research Papers in Economics

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Last time updated on 10/24/2014

This paper was published in Research Papers in Economics.

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