Are mortgage lenders guilty of the housing bubble? A UK perspective

Existing theoretical models of house prices and credit rely on continuous rationality of consumers, an assumption that has been frequently questioned in recent years. Meanwhile, empirical investigations of the relationship between prices and credit are often based on national-level data, which is then tested for structural breaks and asymmetric responses, usually with subsamples. Earlier author argues that local markets are structurally different from one another and so the coefficients of any estimated housing market model should vary from region to region. We investigate differences in the price–credit relationship for 12 regions of the UK. Markov-switching is introduced to capture asymmetric market behaviours and turning points. Results show that credit abundance had a large impact on house prices in Greater London and nearby regions alongside a strong positive feedback effect from past house price movements. This impact is even larger in Greater London and the South East of England when house prices are falling, which are the only instances where the credit effect is more prominent than the positive feedback effect. A strong positive feedback effect from past lending activity is also present in the loan dynamics. Furthermore, bubble probabilities extracted using a discrete Kalman filter neatly capture market turning points.

The impact of two coupled cirrus microphysics-radiation parameterizations on the temperature and specific humidity biases in the tropical tropopause layer in a climate model

The impact of two different coupled cirrus microphysics-radiation parameterizations on the zonally averaged temperature and humidity biases in the tropical tropopause layer (TTL) of a Met Office climate model configuration is assessed. One parameterization is based on a linear coupling between a model prognostic variable, the ice mass mixing ratio, qi, and the integral optical properties. The second is based on the integral optical properties being parameterized as functions of qi and temperature, Tc, where the mass coefficients (i.e. scattering and extinction) are parameterized as nonlinear functions of the ratio between qi and Tc. The cirrus microphysics parameterization is based on a moment estimation parameterization of the particle size distribution (PSD), which relates the mass moment (i.e. second moment if mass is proportional to size raised to the power of 2 ) of the PSD to all other PSD moments through the magnitude of the second moment and Tc. This same microphysics PSD parameterization is applied to calculate the integral optical properties used in both radiation parameterizations and, thus, ensures PSD and mass consistency between the cirrus microphysics and radiation schemes. In this paper, the temperature-non-dependent and temperature-dependent parameterizations are shown to increase and decrease the zonally averaged temperature biases in the TTL by about 1 K, respectively. The temperature-dependent radiation parameterization is further demonstrated to have a positive impact on the specific humidity biases in the TTL, as well as decreasing the shortwave and longwave biases in the cloudy radiative effect. The temperature-dependent radiation parameterization is shown to be more consistent with TTL and global radiation observations.