Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/141983
Authors: 
Muellbauer, John
St-Amant, Pierre
Williams, David
Year of Publication: 
2015
Series/Report no.: 
Bank of Canada Staff Working Paper 2015-40
Abstract: 
There is widespread agreement that, in the United States, higher house prices raise consumption via collateral or possibly wealth effects. The presence of similar channels in Canada would have important implications for monetary policy transmission. We trace the impact of shifts in non-price household credit conditions through joint estimation of a system of error-correction equations for Canadian aggregate consumption, house prices and mortgage debt. We find strong evidence that, after controlling for income and household portfolios, easier credit conditions raise house prices, debt and consumption. However, unlike in the United States, housing collateral effects on consumption are absent. Given credit conditions, rising house prices increase the mortgage down-payment requirement and reduce consumption, although there is evidence for some attenuation of this effect over the 2000s. We also find that high and rising levels of both house prices and debt since the late-1990s can be mostly explained by movements in incomes, housing supply, mortgage interest rates and credit conditions, suggesting that the outlook for house prices and debt could depend mainly on the future paths of these variables.
Subjects: 
Credit and credit aggregates
Domestic demand and components
Economic models
Financial institutions
Financial stability
Financial system regulation and policies
Housing
Transmission of monetary policy
JEL: 
E02
E21
E44
G21
R21
R31
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.