Research Information System
World Finance Conference, Aust-Agder, Norway, 3 - 06 August 2021
Since
housing is one of the most expensive commodities in many countries and hence
most of households need to borrow from residential mortgage markets to obtain
it, it has been seen that there is a close linkage between credit and housing
markets. Particularly, since 1990’s with an increasing dependency on the
domestic financial markets with international financial markets caused by an
increasing degree of financial liberalization, the effects of this relationship
on the financial sector and on the economy have grown in many countries as
proved by the sovereign debt crisis in Ireland and Spain as well as the US
subprime mortgage crisis. However, based on the literature review, there is no
study on the causality between credit supply and house price covering Turkey.
Thus, our aim is to examine whether there is a causal relationship between both
dynamics in Turkey by applying four causality tests: Granger Causality Test,
Toda-Yamamoto Causality Test, Fourier Granger Causality Test and Fourier
Toda-Yamamoto Causality Test. The findings show that there is a strong one-way
causality between mortgage credit and house prices, and that the developments
in credit markets are more decisive in the relationship between mortgage credit
and house prices than the developments on the housing markets. These results
are also confirmed by those of the developments in both credit supply and
housing markets during the last three decade.