Role of credit and expectations in house price dynamics

Using quarterly data for 18 advanced economies from 1991-2020 we estimate a fixed-effects quantile dynamic panel model and provide evidence for non-linearity in the effects of credit, interest rates and expectations on house price growth. We find that excessive credit buildup negatively impacts house price growth during housing busts, whereas low interest rates and expectations, as measured by past house price growth is associated with housing price booms. Using local projections, we also find evidence that these effects persist over multiple quarters.