The Sensitivity of House Prices Under Varying Monetary Regimes: The Nordic Case

17 Pages Posted: 6 Jul 2015

See all articles by Marcelo Cajias

Marcelo Cajias

PATRIZIA AG; Universität Regensburg

Sebastian Ertl

University of Regensburg - International Real Estate Business School (IREBS)

Date Written: July 1, 2015

Abstract

The elasticity of house prices to monetary policy changes, e.g. via interest rates, is from a theoretical perspective and in the long-run negative. However, house prices adapt in the short-run dynamically to economic, financial, institutional and demographic factors. In this paper, we confirm the aforementioned elasticity for the Nordic housing markets, but provide evidence of drastic deviations from the negative relationship when employing rolling regressions in search for time-varying betas. Our empirical results show that recessionary and expansionary policy regimes play a much more important role in the development of house prices in Finland, Sweden and Norway, than in Denmark. We show further that the relationship between house prices and monetary policy is discontinuous over time, with large deviations from the long-term beta during the last decade.

Keywords: Housing prices, Nordics housing market, interest rates, monetary policy, rolling regressions, relative contributions

Suggested Citation

Cajias, Marcelo and Ertl, Sebastian, The Sensitivity of House Prices Under Varying Monetary Regimes: The Nordic Case (July 1, 2015). Available at SSRN: https://ssrn.com/abstract=2627032 or http://dx.doi.org/10.2139/ssrn.2627032

Marcelo Cajias (Contact Author)

PATRIZIA AG ( email )

Fuggerstr. 26
Augsburg, 86150
Germany
+49 (0) 151 17215198 (Phone)

HOME PAGE: http://www.patrizia.ag

Universität Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

Sebastian Ertl

University of Regensburg - International Real Estate Business School (IREBS) ( email )

Universitätsstraße 31
Regensburg, Bavaria 93053
Germany

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