Did Credit Market Policies Cause the Housing Bubble?

Did Credit Market Policies Cause the Housing Bubble?

Many economists have argued that aspects of the credit market, including low interest rates, can explain the boom. The evidence summarized in this Policy Brief casts doubt on the view that easy credit can explain the bubble. It isn’t that low interest rates don’t boost housing prices. They do. It isn’t that higher mortgage approval rates aren’t associated with rising home values. They are. But the impact of these variables, as predicted by economic theory and as estimated empirically over many years, is too small to explain much of the housing market event that we have just experienced.

Edward Glaeser, Joshua Gottlieb, and Joseph Gyourko

Rappaport Institute/Taubman Center Policy Brief

May 5, 2010

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By |2018-01-01T00:00:00-08:00January 1st, 2018|Efficiency/Growth, Land Use Regulation, Reference, Reforms|