Working Paper: CEPR ID: DP9754
Authors: Augustin Landier; David Sraer; David Thesmar
Abstract: The correlation across US states in house price growth increased dramatically between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first theoretically derive an appropriate measure of banking integration across state pairs and document that house price growth correlation is strongly related to this measure of financial integration. Our IV estimates suggest that banking integration can explain up to one third of the rise in house price correlation over the period.
Keywords: Comovement; Financial Integration; House Prices
JEL Codes: F36; G21; R30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| banking integration (G21) | house price comovement (R31) |
| interstate banking deregulations (G28) | banking integration (G21) |
| interstate banking deregulations (G28) | house price comovement (R31) |
| banking integration (G21) | house price correlation (R31) |