Norges Bank

Staff Memo

Credit, house prices, and risk taking by banks in Norway

Artashes Karapetyan
Staff Memo


Motivated by alternative explanations of the financial crisis (e.g., Acharya and Richardson, 2010; Taylor, 2007),3 I study, first, repercussions between house price growth and household credit growth in Norway, and second, I analyse the impact of expansionary monetary policy on measures of bank portfolio risk (the risk-taking channel). Using aggregate quarterly data from 1979Q1 to 2010Q3, I find evidence of two-way causality between house price growth and household credit growth, but I find no evidence for the bank risk-taking channel: low key policy rates do not seem to have induced a higher share of troubled loans nor increased our measure of banks’ riskiness.

Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.

ISSN 1504-2596 (online)

Published 22 November 2011 16:05
Published 22 November 2011 16:05