House prices , bank balance sheets , and bank credit supply ∗
نویسندگان
چکیده
We examine the effect of house price appreciation on bank loan portfolios during the 1996—2006 period. While most previous research in this area has concentrated on loan demand effects, we evaluate how house prices affect a bank’s credit supply. Controlling for possible simultaneity between house prices and bank loan portfolio growth, we find that banks affected by greater house price appreciation became larger and increase their business lending as well as their mortgage lending. Next, we use county-level data to decompose small business loan growth into supply and demand shocks, and find that house prices have a significantly positive impact on an affected bank’s supply of small business loans. Furthermore, house price booms have a positive effect on the employment growth of small establishments at the county level through the bank balance sheet channel. JEL Classification: G21,R31
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