American Economic Review Vol. 105 No. 3 2015

Credit Supply and the Price of Housing

Giovanni Favara¹; Jean Imbs²

¹ Board of Governors of the Federal Reserve System, Division of Research and Statistics, 20th Street and Constitution Avenue NW, Washington, DC 20551 (e-mail: ) · ² Paris School of Economics, 106 Boulevard de l'Hopital, 75013 Paris, France, CNRS, and CEPR (e-mail: ).

Abstract

An exogenous expansion in mortgage credit has significant effects on house prices. This finding is established using US branching deregulations between 1994 and 2005 as instruments for credit. Credit increases for deregulated banks, but not in placebo samples. Such differential responses rule out demand-based explanations, and identify an exogenous credit supply shock. Because of geographic diver-sification, treated banks expand credit: housing demand increases, house prices rise, but to a lesser extent in areas with elastic housing supply, where the housing stock increases instead. In an instrumental variable sense, house prices are well explained by the credit expansion induced by deregulation.

DOI

10.1257/aer.20121416

Volume

105

Issue

3

Pages

958-992

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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