A study on the relationship between real estate prices and housing loans in Taiwan
Date Issued
2010
Date
2010
Author(s)
CHANG, CHIA-CHUN
Abstract
Since 1980s, the international funds have circulated rapidly due to the financial globalization and the financial liberalization, so that the asset markets made enormous and frequent fluctuations all over the world, especially real estate. Every significant financial event around the world is almost related to the market of real estate. The US subprime mortgage crisis in 2007 was the most famous case recently. It showed that the volatility of real estate prices and the development of financial system are getting closer and closer.
In this research, we took 66 data collected from 1993 Q1 to 2009 Q2 in Taiwan to analyze structural change test, unit root test, co-integration test, error correction model and Granger causality test in order to explore the relationship between real estate prices and housing loans. The results show that there are two co-integration vectors between the housing loans, housing prices, interest rates and gross domestic product, based on co-integration test. It means that there is a long-term equilibrium relationship between the variables. We also find that housing prices and housing loans have a complementary relationship between each other by the Granger causality test.
This paper concludes that there is a reciprocal effect between Taiwan''s real estate prices and housing loans and it does exist. It can not be ignored that the implied banking system is closely relative to the real estate market. Therefore, the policies of Government should carefully assess the both relationship with the others. Our research could be a reference for Government to make policies about that how to stabilize the real estate and finance.
Subjects
Price of Real Estate
Housing Loans
Cointegration Test
Error Correction Model
Granger Causality Test
Type
thesis
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