Home equity loan as a cause of asymmetric relationship between real estate price and consumption

Kód výsledku v IS VaVaI

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Výsledek na webu

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DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Home equity loan as a cause of asymmetric relationship between real estate price and consumption

Popis výsledku v původním jazyce

The aim of the paper is to point out the cause of the asymmetric relationship between real estate price and consumption. Generally, when prices raise consumption decreases. However, real estate is not only source of housing. It is also a source of wealth and as such can be converted into liquidity at a suitable time by using a home equity loan. Unfortunately, the best time for this convertibility is the moment least suitable for the authorities who are responsible for monetary control. Firstly, I refer to the channel of a transmission mechanism by which central bank can disrupt the economy at the time of boom. Secondly, I introduce and verify a mechanism that may cause the rise of consumption depending on the real estate price increase in boom times. Last but not least, I mention why there could be the relationship between the price of real estate and the consumption problematic when setting monetary policy. The cross-correlation analysis is implemented on data of the Czech Republic which cover the period between 2006Q1 and 2017Q4. The outcome of the work results in the fact that a mechanism which can pump up a large amount of financial resources to the economy at an inappropriate moment can be a reason why the effectiveness of restrictive measures of the monetary authorities in the Czech Republic is slowing down.

Název v anglickém jazyce

Home equity loan as a cause of asymmetric relationship between real estate price and consumption

Popis výsledku anglicky

The aim of the paper is to point out the cause of the asymmetric relationship between real estate price and consumption. Generally, when prices raise consumption decreases. However, real estate is not only source of housing. It is also a source of wealth and as such can be converted into liquidity at a suitable time by using a home equity loan. Unfortunately, the best time for this convertibility is the moment least suitable for the authorities who are responsible for monetary control. Firstly, I refer to the channel of a transmission mechanism by which central bank can disrupt the economy at the time of boom. Secondly, I introduce and verify a mechanism that may cause the rise of consumption depending on the real estate price increase in boom times. Last but not least, I mention why there could be the relationship between the price of real estate and the consumption problematic when setting monetary policy. The cross-correlation analysis is implemented on data of the Czech Republic which cover the period between 2006Q1 and 2017Q4. The outcome of the work results in the fact that a mechanism which can pump up a large amount of financial resources to the economy at an inappropriate moment can be a reason why the effectiveness of restrictive measures of the monetary authorities in the Czech Republic is slowing down.

Druh

D - Stať ve sborníku

CEP obor

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OECD FORD obor

50202 - Applied Economics, Econometrics

Projekt

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Návaznosti

S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2018

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

Quantitative Methods in Economics; Multiple Criteria Decision Making XIX

ISBN

9788089962075

ISSN

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e-ISSN

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Počet stran výsledku

7

Strana od-do

298-304

Název nakladatele

University of Economics, Bratislava

Místo vydání

University of Economics

Místo konání akce

Trenčianske Teplice, Slovakia

Datum konání akce

1. 1. 2018

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

000455265500040