Working Paper: CEPR ID: DP10161
Authors: Scar Jord; Moritz Schularick; Alan M. Taylor
Abstract: This paper unveils a new resource for macroeconomic research: a long-run dataset covering disaggregated bank credit for 17 advanced economies since 1870. The new data show that the share of mortgages on banks? balance sheets doubled in the course of the 20th century, driven by a sharp rise of mortgage lending to households. Household debt to asset ratios have risen substantially in many countries. Financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries. Housing finance has come to play a central role in the modern macroeconomy.
Keywords: Business cycles; Financial crises; Leverage; Local projections; Mortgage lending; Recessions
JEL Codes: C14; C38; C52; E32; E37; E44; E51; G01; G21; N10; N20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in mortgage lending (G21) | increase in credit-to-GDP ratios (F65) |
| increase in mortgage lending (G21) | shift in banks' focus from traditional intermediation to real estate financing (G21) |
| rapid growth of mortgage lending (G21) | higher household debt levels relative to asset values (G51) |
| nature of credit booms (E32) | influence on business cycle dynamics (E32) |
| mortgage booms (G21) | deeper recessions and slower recoveries (E32) |
| increased reliance on mortgage lending (G21) | significant predictor of financial crises (G01) |