Purpose This paper aims to assess the long-run drivers and short-term dynamics of real house prices in Sweden for 1986Q1 to 2016Q4. More specifically, the author examines the extent to which real house prices are determined by affordability, demographics and asset price factors. Design/methodology/approach The author conducts a cointegration analysis and applies a vector autoregression model to examine the long- and short-run responsiveness of Swedish real house prices to a number of key categories of fundamental variables. Findings The empirical results indicate that house prices will increase in the long run by 1.04 per cent in response to a 1 per cent increase in household real disposable income, whereas real after-tax mortgage interest and real effective exchange rates show average long-term effects of approximately – 8 and – 0.7 per cent, respectively. In addition, the results show that the growth of real house prices is affected by growth in mortgage credit, real after-tax mortgage interest rates and disposable incomes in the short run, whereas the real effective exchange rate is the most significant determinant of Swedish real house appreciation. Originality/value The impact of the two lending restrictions been implemented after the financial crisis – the mortgage cap in October 2010 and the amortization requirement in June 2016 – are ineffective to stabilize the housing market. This suggests that macroprudential measures designed to ease pressure on housing prices and reduce risks to financial stability need to focus on these fundamentals and address the issues of tax deductibility on mortgage rates and the gradual implementation of debt-to-income limits to contain mortgage demand and improve households’ resilience to shocks.

Purpose This paper aims to investigate the presence of a housing bubble using Swedish data from 1986Q1-2016Q4 by using various methods. Design/methodology/approach First, the authors use affordability indicators and asset-pricing approaches, including the price-to-income ratio, price-to-rent ratio and user cost, supplemented by a qualitative discussion of other factors affecting house prices. Second, the authors use cointegration techniques to compute the fundamental (or long-run) price, which is then compared with the actual price to test the degree of Sweden’s housing price bubble during the studied period. Third, they apply the univariate right-tailed unit root test procedure to capture bursting bubbles and to date-stamp bubbles. Findings The authors find evidence for rational housing bubbles with explosive behavioral components beginning in 2004. These bubbles do not continuously diverge but instead periodically revert to their fundamental value. However, the deviation is persistent, and without any policy correction, it takes decades for real house prices to return to equilibrium. Originality/value The policy implication is that monetary policy designed to contain mortgage demand and thereby prevent burst episodes in the housing market must address external imbalances, as revealed in real exchange rate undervaluation. It is unlikely that current policies will stop the rise of house prices, as the growth of mortgage credit, improvement in Sweden’s international competitiveness and the path of interest rates are much more important factors.

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The tremendous impact of the coronavirus pandemic on the global aviation industry has led to many cases of airline financial distress and bankruptcy. The Asia–Pacific region (APAC) contains more than half of the world’s population, and its airlines had the highest profit margin of any region. In this study, we investigate whether corporate sustainability practice can reduce the financial distress risk of air carriers, and, if so, what would the effect be in APAC? We first examine the relationship between environmental, social, and governance disclosure and the likelihood of financial distress of airlines as measured by the Altman Z″-score. Second, we analyze the moderating role of being an APAC airline in this relationship. The findings support the claim that implementing environmental actions may increase financial distress risk, and by improving social and governance activities, airlines can mitigate the risk of financial distress. The negative influence of the environmental pillar and the positive influence of the social pillar can be smaller for APAC airlines. Our study provides empirical evidence of the influence of environmental, social, and governance (ESG) on the likelihood of financial distress in the airline industry. Moreover, we analyze the moderating role of being an APAC airline in the relationship between sustainability and financial distress. This study has significant implications for executives, managers, and policymakers in the aviation industry on ESG strategy decisions and the general issue of sustainability.

Diversification, Volatility spillover, GARCH-M, G11, C22, C01,