Housing Price, Credit, and Output Cycles: How Domestic and External Shocks Impact Lithuania's Credit
Housing Price, Credit, and Output Cycles: How Domestic and External Shocks Impact Lithuania's Credit

Author: Iacovos Ioannou

Publisher: International Monetary Fund

Published: 2018-07-12

Total Pages: 54

ISBN-13: 148436838X

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Lithuania’s current credit cycle highlights the strong link between housing prices and credit. We explore this relationship in more detail by analyzing the main features of credit, housing price, and output cycles in Baltic and Nordic countries during1995-2017. We find a high degree of synchronization between Lithuania’s credit and housing price cycles. Panel regressions show a strong correlation between a credit upturn and housing price upturn. Moreover, panel VAR suggests that shocks in housing prices, credit, and output within and outside Lithuania strongly impact Lithuania’s credit.

Housing Price, Drecit, and Output Cycles
Housing Price, Drecit, and Output Cycles

Author: Iacovos Iannou

Publisher:

Published: 2018

Total Pages: 38

ISBN-13:

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Lithuania’s current credit cycle highlights the strong link between housing prices and credit. We explore this relationship in more detail by analyzing the main features of credit, housing price, and output cycles in Baltic and Nordic countries during1995–2017. We find a high degree of synchronization between Lithuania’s credit and housing price cycles. Panel regressions show a strong correlation between a credit upturn and housing price upturn. Moreover, panel VAR suggests that shocks in housing prices, credit, and output within and outside Lithuania strongly impact Lithuania’s credit.

Republic of Lithuania
Republic of Lithuania

Author: International Monetary Fund. European Dept.

Publisher: International Monetary Fund

Published: 2018-06-29

Total Pages: 60

ISBN-13: 1484364864

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This 2018 Article IV Consultation highlights that the economy of Lithuania picked up steam in 2017, following two years of sluggish growth. Real GDP expanded by 3.9 percent largely because of the acceleration of investment, which benefited from credit growth and high capacity utilization. Private consumption remained the main engine of growth, though it was held back by decelerating real wages. The external current account swung to a modest surplus with exports benefiting from past investments in export capacity and improved external demand. Growth in 2018 is projected at 3.2 percent, mainly because of weaker exports after a very strong performance in 2017 and a slowdown of consumption driven by negative employment growth.

OECD Economic Surveys: Lithuania 2020
OECD Economic Surveys: Lithuania 2020

Author: OECD

Publisher: OECD Publishing

Published: 2020-11-23

Total Pages: 116

ISBN-13: 9264924353

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Lithuania’s economy is performing strongly and converging fast towards the most-developed OECD countries, driven by growing exports and investments and supported by a sound macroeconomic framework as well as a friendly business climate. For the first time since renewed independence, more people are settling in the country than leaving it. The peak of the COVID-19 crisis was one of the mildest in Europe, thanks to a well-functioning health system, effective containment measures and a relatively short lockdown. Yet prosperity is unevenly distributed across people and places. Further reform could help sustain achievements to date. Providing adequate income support for the needy, especially the elderly, and high quality social services, while improving integration into the labour market, could help reduce poverty. Stronger local and regional institutions, better education and skills particularly in rural areas and a more flexible housing market could make regional development more balanced. Finally, strengthening the regulatory framework, reducing the scope of state-owned enterprises and moving towards a low-carbon economy will help raise productivity while ensuring resilient and sustainable growth. SPECIAL FEATURES: REDUCING POVERTY; FOSTERING REGIONAL DEVELOPMENT

Three Cycles
Three Cycles

Author: Alain N. Kabundi

Publisher: International Monetary Fund

Published: 2009-10-01

Total Pages: 34

ISBN-13: 1451873786

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We examine the characteristics and comovement of cycles in house prices, credit, real activity and interest rates in advanced economies during the past 25 years, using a dynamic generalized factor model. House price cycles generally lead credit and business cycles over the long term, while in the short to medium term the relationship varies across countries. Interest rates tend to lag other cycles at all time horizons. While global factors are important, the U.S. business cycle, house price cycle and interest rate cycle generally lead the respective cycles in other countries over all time horizons, while the U.S. credit cycle leads mainly over the long term.

Housing Finance and Real-Estate Booms
Housing Finance and Real-Estate Booms

Author: Mr.Eugenio Cerutti

Publisher: International Monetary Fund

Published: 2015-06-03

Total Pages: 35

ISBN-13: 1513552074

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The recent global crisis highlighted the risks stemming from real estate booms. This has generated a growing literature trying to better understand the sources and the risks associated with housing and credit booms. This paper complements and supplements the previous work by (i) exploiting more disaggregated data on credit allowing us to dissociate between firm-credit and household (and in some cases mortgage) credit, and (ii) by taking into account the characteristics of the mortgage market, including institutional as well as other factors that vary across countries. This detailed cross-country analysis offers new valuable insights.

Credit Expansion in Emerging Markets
Credit Expansion in Emerging Markets

Author: Ms.Mercedes Garcia-Escribano

Publisher: International Monetary Fund

Published: 2015-09-29

Total Pages: 24

ISBN-13: 1513581929

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This paper explores the contribution of credit growth and the composition of credit portfolio (corporate, consumer, and housing credit) to economic growth in emerging market economies (EMs). Using cross-country panel regressions, we find significant impact of credit growth on real GDP growth, with the magnitude and transmission channel of the impact of credit on real activity depending on the specific type of credit. In particular, the results show that corporate credit shocks influence GDP growth mainly through investment, while consumer credit shocks are associated with private consumption. In addition, taking Brazil as a case study, we use a time series model to examine the role that the expansion and composition of credit played in driving real GDP growth in the past. The results of the case study are consistent with those found in the cross-country panel regressions.

Essays on Housing and Credit Market
Essays on Housing and Credit Market

Author: Won Suk Chung

Publisher:

Published: 2021

Total Pages: 0

ISBN-13:

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This dissertation is comprised of three chapters focusing on housing and credit market. The first and the third chapter analyze how a housing affects business cycle through lending constraints and mortgage contracts, while the second chapter investigates the decoupling credit markets by firms during the recession periods.The first chapter studies the business cycle asymmetry of consumption and house prices in the US. It shows that the credit shock leads to business cycle asymmetry of consumption and house prices, but the housing belief shock does not cause the business cycle asymmetry. In a New Keynesian model with a housing, the occasionally binding lending constraint leads to an asymmetric response of consumption and house prices to the credit supply shock, not the housing belief shock.The second chapter investigates the decoupling phenomenon between loans and corporate bonds markets during the recession periods. I show that by an expansionary monetary policy, a large firm increases long-term debt, but a small firm decreases long-term debt. A `cash-flow' constraint prevents the small firm from obtaining more loans via bank-lending following the expansionary Quantitative Easing (QE) or Corporate Credit Facility (CCF) policy. However, the large firm can issue more corporate bonds because it is not constrained by the 'cash-flow' constraint.The third chapter focuses on the responses of macro variables depending on mortgage designs: the fixed-rate mortgage (FRM) and the adjustable-rate mortgage (ARM). I show that the monetary policy effects in the ARM-economy is stronger than in the FRM-economy. The constraint switching effect of output and house prices in the ARM-economy in response to the monetary policy is greater than the one in the FRM-economy. The refinancing effect enhances the response of output in the FRM-economy due to rate incentive and cash-out incentive. However, the endogenous refinancing effect is smaller than the exogenous refinancing effect in the ARM-economy because the ARM-economy satisfies the rate incentive and the refinancing transaction costs are required.

Global House Price Fluctuations
Global House Price Fluctuations

Author: Mr.Hideaki Hirata

Publisher: International Monetary Fund

Published: 2013-02-06

Total Pages: 47

ISBN-13: 1475523629

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We examine the properties of house price fluctuations across 18 advanced economies over the past 40 years. We ask two specific questions: First, how synchronized are housing cycles across these countries? Second, what are the main shocks driving movements in global house prices? To address these questions, we first estimate the global components in house prices and various macroeconomic and financial variables. We then evaluate the roles played by a variety of global shocks, including shocks to interest rates, monetary policy, productivity, credit, and uncertainty, in explaining house price fluctuations using a wide range of FAVAR models. We find that house prices are synchronized across countries, and the degree of synchronization has increased over time. Global interest rate shocks tend to have a significant negative effect on global house prices whereas global monetary policy shocks per se do not appear to have a sizeable impact. Interestingly, uncertainty shocks seem to be important in explaining fluctuations in global house prices.

Hysteresis and Business Cycles
Hysteresis and Business Cycles

Author: Ms.Valerie Cerra

Publisher: International Monetary Fund

Published: 2020-05-29

Total Pages: 50

ISBN-13: 1513536990

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Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.