Banking Competition, Housing Prices and Macroeconomic Stability
Bibliographic Data
| ID | 9713173 |
|---|---|
| Authors | Javier Andrés (0000-0003-0980-4833, Universidad de Valencia and Banco de España), Oscar Arce (Comisión Nacional del Mercado de Valores (CNMV)) |
| Year | 2012 |
| Volume | 122 |
| Issue | 565 |
| Pages | 1346-1372 |
| Publication date | 2012-12-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/j.1468-0297.2012.02531.x |
| OpenAlex | W3121339985 |
| Language | EN |
| Citations received | 3 |
| References cited | 42 |
We develop a dynamic general equilibrium model with an imperfectly competitive bank-loans market and collateral constraints that tie investors credit capacity to the value of their real estate holdings. Banks set optimal lending rates taking into account the effects of their price policies on their market share and on the volume of funds demanded by each customer. Lending margins have a significant effect on aggregate variables. Over the long run, fostering banking competition increases total consumption and output by triggering a reallocation of available collateral towards investors. However, as regards the short-run dynamics, we find that most macroeconomic variables are more responsive to exogenous shocks in an environment of highly competitive banks. Key to this last result is the reaction of housing prices and their effect on borrowers' net worth. The response of housing prices is more pronounced when competition among banks is stronger, thus making borrowers' net worth more vulnerable to adverse shocks and, specially, to monetary contractions. Thus, regarding changes in the degree of banking competition, the model generates a trade-off between the long run level of economic activity and its stability at the business cycle frequency
Business cycle · Collateral · Competition (biology · Economics · Interest rate · Macroeconomics · Monetary economics · Monetary policy · Real estate · Banking stability, regulation, efficiency · Economic theories and models · Finance · Global Financial Crisis and Policies
Staggered prices in a utility-maximizing framework
The Effect of Credit Market Competition on Lending Relationships
House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle
Monopolistic Competition with Outside Goods
Spatial competition in the banking system
Income and Wealth Heterogeneity in the Macroeconomy
Credit Cycles
| Unique citing works | 3 |
|---|---|
| Citations per year | 0,27 |
| Citation span | 2015 - 2024 (10) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 3 |