Determinants of bank and non-bank household loans and short-and long-horizon forecast

Chang Hoon Lee, Kyu Ho Kang, Junghwan Mok

Research output: Contribution to journalArticle

Abstract

The instability of the financial system is likely to occur when particular types of loans surge rather than all types of loans surge at the same time. A preemptive policy response requires a monitoring system based on forecasts by different loan types. The purpose of this study is to forecast household loans by categorizing into four types: bank mortgage loan, bank credit loan, non-bank mortgage loan, and non-bank credit loan. Given the fact that there are numerous determinants and forecasting models for household loans, and that the determinants differ depending on the type of household loans, this study sets out the density forecasting algorithm based on Bayesian Machine Learning. which consists of a variable learning process, a model learning process, and a forecasting combination process. We find bank mortgage loans are largely predicted by the loan rates, the volume of apartments to be moved in, and the number of apartment units to be sold. while the key determinants of bank credit loans are the employment rate and Jeon-se price index. On the other hand, the non-bank mortgage loans are largely determined by the loan rates and the ratio of apartment sales prices relative to Jeon-se prices. The non-bank credit loans are also influenced by not only the employment rate and the Jeon-se price index but also stock returns.

Original languageEnglish
Pages (from-to)23-57
Number of pages35
JournalJournal of Economic Theory and Econometrics
Volume29
Issue number3
Publication statusPublished - 2018 Sep 1

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Loans
Forecast horizon
Household
Mortgage loan
Learning process
Employment rate
Loan rates
Price index
Bank credit
Credit
Machine learning
Monitoring system
Policy responses
Financial system
Stock returns
Density forecasting
Relative prices

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Determinants of bank and non-bank household loans and short-and long-horizon forecast. / Lee, Chang Hoon; Kang, Kyu Ho; Mok, Junghwan.

In: Journal of Economic Theory and Econometrics, Vol. 29, No. 3, 01.09.2018, p. 23-57.

Research output: Contribution to journalArticle

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