Bank lending and housing prices in Sweden

Peter Öhman (Department of Business, Economics and Law, Mid Sweden University, Sundsvall, Sweden)
Darush Yazdanfar (Department of Business, Economics and Law, Mid Sweden University, Sundsvall, Sweden)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Publication date: 4 June 2018

Abstract

Purpose

The purpose of this study is to investigate the Granger causal link between bank lending and housing 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 cover bank lending, apartment prices, villa prices, mortgage rates and the consumer price index from September 2005 to October 2013.

Findings

The results indicate that bank lending and housing prices are cointegrated. According to Granger causality tests, bidirectional relationships exist between bank lending and each of apartment and villa prices, confirming the financial accelerator mechanism. However, earlier shocks arising from housing prices themselves account for the greatest variation in future prices.

Originality/value

To the authors’ knowledge, 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.

Keywords

Citation

Öhman, P. and Yazdanfar, D. (2018), "Bank lending and housing prices in Sweden", International Journal of Housing Markets and Analysis, Vol. 11 No. 3, pp. 498-519. https://doi.org/10.1108/IJHMA-07-2017-0063

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Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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