Abstracts Business

Real estate cycles and bank systemic risks

by Georgina Ge

This thesis presents an empirical study of the linkages between boom-bust cycles in the real estate market and systemic banking crises. The work contributes to the literature by estimating the conditional probablity of systemic banking crises as a function of time varying market and macroeconomic conditions, as well as characteristic information on real estate markets. The model is expected to offer regulators a quantitative basis for assessing the vulnerability of the financial system to real estate cycles. The findings suggest that a disconnection between credit aggregation to economic output, as well as that between property values and income levels tend to precede banking crises. In addition, growth rates of housing prices in the short-term are found to have a strong predictive power in providing early warning signals for banking crises.