Do Housing Prices Affect Loan Supply? : Evidence from Sweden During the Post-Crisis Period

Abstract: Financial intermediaries are paramount for modern society. During the last decade, however, our reliance on these institutions have been meticulously debated, especially in the aftermath of the financial crisis. This thesis contributes to this debate with a novel perspective on loan supply changes in light of the recent events in the Swedish real estate market. More specifically, it investigates what influence housing prices have on the supply of commercial and industrial loans. This is done by estimating dynamic panel data models using a quarterly panel containing balance sheet data for 68 Swedish monetary financial institutions, during the post-financial crisis period of 2009-2017. The results indicate that housing prices do not have a significant effect on commercial and industrial loan supply. However, these loans are to a considerable degree dependent on the institutes’ earlier levels of commercial and industrial loans.