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Real Estate Soars and Financial Crises: Recent Stories

1
Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology (KAIST), Daejeon 34141, Korea
2
Department of Geography, Chonnam National University, Gwangju 61186, Korea
3
HSBC Business School, Peking University, Shenzhen 518055, China
*
Authors to whom correspondence should be addressed.
Sustainability 2018, 10(12), 4559; https://doi.org/10.3390/su10124559
Received: 15 November 2018 / Revised: 27 November 2018 / Accepted: 28 November 2018 / Published: 3 December 2018
(This article belongs to the Special Issue Sustainability and Econophysics)
This paper studies the contribution of real estate bubble to a financial crisis. First, we document symptoms of a real estate bubble along with a slowdown of the real economy and find indicators of an imminent crash of the stock market, triggering a sense of déjà vu from the 2008 crisis. However, we show that the relationship between real estate and financial markets has changed since the crisis. The empirical analyses provide evidence that the monetary policy has recovered its control over mortgage rates, which had been lost prior to the global financial crisis, and that the real estate market does not have a Granger causality relationship with the stock market any more. Findings suggest that an imminent financial market crash is not likely to be catalyzed by a real estate bubble. View Full-Text
Keywords: financial crash; real estate bubble; stock market financial crash; real estate bubble; stock market
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Jang, H.; Song, Y.; Sohn, S.; Ahn, K. Real Estate Soars and Financial Crises: Recent Stories. Sustainability 2018, 10, 4559.

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