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Reform Capacity and Macroeconomic Performance in the Nordic Countries$
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Torben M. Andersen, Michael Bergman, and Svend E. Hougaard Jensen

Print publication date: 2015

Print ISBN-13: 9780198717102

Published to Oxford Scholarship Online: March 2015

DOI: 10.1093/acprof:oso/9780198717102.001.0001

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House Prices in Denmark and Sweden

House Prices in Denmark and Sweden

Chapter:
(p.163) 7 House Prices in Denmark and Sweden
Source:
Reform Capacity and Macroeconomic Performance in the Nordic Countries
Author(s):

U. Michael Bergman

Bjørn Tangaa Sillemann

Peter Birch Sørensen

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198717102.003.0012

This chapter studies the housing market in Denmark and Sweden. While house prices in both countries increased substantially during the run-up to the current crisis, in Denmark the increases were followed by a sharp downturn whereas in Sweden house prices have remained on a historically high level. The behaviour of house prices is studied by means of an econometric model which is used to evaluate whether house prices are over- or undervalued. Persistent deviations of actual house prices from their fundamental values are found, and evidence is provided to suggest that interest rate changes, credit growth, and household expectations play significant roles in the deviations. This supports the view that monetary policy cannot bear the full burden of reducing house prices and that fiscal policy, through its effects on credit growth, also plays an important role.

Keywords:   Nordic housing markets, housing bubbles, fundamental house prices, macroeconomic policy

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