Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250134 
Year of Publication: 
2021
Series/Report no.: 
Discussion Papers No. 967
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
The recent boom in house prices in many countries during the Covid-19 pandemic and the possibility of household financial distress are of concern among some central banks. We revisit the empirical modelling of house prices and household debt with a policy-oriented perspective using Norwegian data over the last four decades within the cointegrated VAR model. Our findings suggest, in line with previous work, a long-run mutually reinforcing relationship between these financial magnitudes, and thus the potential for the build-up of financial instabilities and spillover effects to the real economy. Applying a control analysis, we find that both house prices and debt are controllable magnitudes to some pre-specified target levels through the mortgage interest rate, which enables the central bank to reduce large fluctuations and bubble tendencies in the housing market. The present control analysis thus provides some useful policy implications from empirically relevant representations of two important financial factors entering the decision process of the policy maker.
Subjects: 
House prices
household debt
econometric modelling
cointegrated VAR
policy control analysis
simulation
JEL: 
C32
C53
E52
R21
Document Type: 
Working Paper

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