Discussion Paper Details

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Title: Bank Lending and Property Prices in Hong Kong

Author(s): Stefan Gerlach and Wensheng Peng

Publication Date: December 2004

Keyword(s): bank lending, Hong Kong and property prices

Programme Area(s): Financial Economics and International Macroeconomics

Abstract: This Paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy cannot be used to guard against asset price swings. Third, despite the collapse in property prices since 1998, the banking sector remains sound. While the contemporaneous correlation between lending and property prices is large, our results suggest that the direction of influence goes from property prices to bank credit rather than conversely.

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Bibliographic Reference

Gerlach, S and Peng, W. 2004. 'Bank Lending and Property Prices in Hong Kong'. London, Centre for Economic Policy Research.