Prague Economic Papers 2022, 31(6):443-463 | DOI: 10.18267/j.pep.816

Modelling Household Mortgage Debt: the case of the Czech Republic

Lukáš Fiala ORCID...a
a Prague University of Economics and Business, Faculty of Finance and Accounting, Prague, Czech Republic

This paper deals with Czech household mortgage debt and its determinants in the period 1Q2005-2Q2021. Our analysis focuses on the variables determining the level of mortgage debt from both short- and long-term perspectives. Our contribution is two-fold. Firstly, we examine the relationship between the selected variables within a cross-correlation analysis. The results confirm the positive dependency of household mortgage debt and real GDP, real gross average income and the level of house prices. By contrast, a negative relationship was identified for real interest rates, the unemployment rate and the inflation rate. Secondly, we explore the ARDL and EC models and identify one cointegration relationship. Our results confirm that house prices and real wages are determinants of household mortgage debt in the long-term perspective. However, a wider range of variables plays a role in the short run, including house prices, real gross average income, inflation and long-term interest rates. Moreover, our model indicates the insignificance of unemployment in both the short and long run.

Keywords: Mortgage debt, household debt, cointegration, ARDL model
JEL classification: C01, C22

Received: March 11, 2022; Revised: August 9, 2022; Accepted: September 13, 2022; Published: December 29, 2022  Show citation

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Fiala, L. (2022). Modelling Household Mortgage Debt: the case of the Czech Republic. Prague Economic Papers, 31(6), 443-463. doi: 10.18267/j.pep.816
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