Stock and Real Estate Markets in Korea: Wealth or Credit-Price Effect

The purpose of this study is to examine the relationship be-tween stock and real estate prices in the Korean market over anineteen-year period using vector autoregression (VAR). This re-lationship is interpreted through two transmission mechanisms,wealth eect and credit-price eect. We document evidence thathouse and land prices Granger-cause stock prices in most regionalhousing and land markets, but there is no converse causation fromstock to real estate markets. Using generalized impulse responsefunctions, we also nd that when real estate prices experience sud-den shocks, immediate positive responses are seen in stock prices.Our empirical results support the assertion that land prices, par-ticularly industrial land prices, work according to the credit-priceeect hypothesis.