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|Title:||Real estate market and financial stability in US metropolitan areas: A dynamic model with spatial effects|
|Keywords:||Dynamic panels;GMM estimator;House prices;Non-performing loans;Spatial dependence|
|Citation:||Regional Science and Urban Economics, 49: 129 - 146, (November 2014)|
|Abstract:||This paper investigates spatio-temporal variations in ex-post credit risk in the United States, as a function of real estate prices, loan purchases made by government sponsored enterprises, and a set of local characteristics during the recent housing boom and bust.We model bank's non-performing loans as a first-order dynamic panel data regression model with group-specific effects and spatial autoregressive errors. To estimate this model, we develop an ad-hoc generalized method of moments procedure which consists of augmenting moments proposed by the panel literature to estimate short T, pure dynamic panels, with a set of quadratic conditions in the disturbances. Results on estimation of the empirical model point at the negative impact of real estate prices on non-performing loans. Further, our results show that a rise in the number of real estate mortgages backed by government-sponsored enterprises increases non-performing loans, thus deteriorating the quality of banks' loan portfolio.|
|Appears in Collections:||Brunel Business School Research Papers|
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