In Ireland, real property prices increased at an average of 12 per cent per annum from 1996 to 2002 with residential mortgage credit also increasing substantially. In this paper, the relationship between domestic bank credit and Irish house prices is examined empirically. Using a number of econometric approaches, we find evidence of a long-run mutually reinforcing relationship. The results are used to underpin a short-run system of the housing and credit sector. Simulations are then conducted to reveal the response of house prices and credit to once-off increases in key explanatory variables. Copyright � 2007 The Authors; Journal compilation � 2007 Blackwell Publishing Ltd and The University of Manchester.

Highlights• We evaluate default prediction performance of machine learning/regression models.• Including boosted trees, random forests, penalised linear/semi-parametric logistic regression.• Using data on over 300,000 residential mortgage loans.• The results indicate varying degrees of predictive power.• Statistical tests suggest boosted regression trees outperform penalised logistic regression.

To date, work concerned with the potential determinants of credit institutions’ profit inefficiency levels has addressed this issue in either a single-step or multi-step process. In the former, inefficiency scores are conditioned by region and bank-specific indicators, while in the latter, generated inefficiency scores are subsequently regressed on a set of potential correlates. The approach proposed here allows these issues to be explored jointly in a statistically consistent manner. The model is applied to a sample of banks from Ireland, the UK, Canada and Australia.

We combine the dynamic dividend-discount model with an accountingbased vector autoregression framework that allows for a decomposition of EU banks' stock returns to cash- ‡ow and expected return news components. The main …ndings are that while the bulk of the variability of EU banks' stock returns is due to cash ‡ow shocks, the expected return shocks are relatively more important for larger than for smaller banks. Moroever, variables used in the literature as cash- ‡ow proxies explain a higher share of the cash- ‡ow component of the total excess returns for smaller than for larger EU banks. This suggests that large banks could be more prone to market wide news and events -that in the literature are associated with the expected return news component -as opposed to the bank-speci…c news, typically assumed to be incorporated in the cash- ‡ow component.