Effects of collateral constraints on house prices unclear
What do we know about the effects of changes in collateral constraints on house prices, asks Jouko Vilmunen, the head of research at the Bank of Finland, in the central bank's latest Research Newsletter.
Vilmunen notes standard theories of residential housing markets fail to predict significant house price effects from changes in collateral constraints. He says that moreover, these theories have difficulty in accounting for the observed sustained positive trend in house prices. He says that
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