Abstract
Research background: Based on the history of financial crises, real estate market behavior could be thought of as a key benchmark of trust shifts in the financial sector of the economy. Plunging real estate asset prices accompanied by the financial "bubbles" explosion could be viewed as the harbinger ? even the cause ? of the public trust crash in the financial sector.
 Purpose of the article: This study intends to assess the extent to which the real estate market behavior determinants, along with financial sector consumers' feelings, are able to predict trust crises in the financial sector, namely to its primary institutions ? European Central Bank and the Euro.
 Methods: In order to estimate the probability of a trust crisis in the financial sector, two logistic regression logit models were developed based on two types of dependent variables as they reflect trust violations in the financial system primary institutions ? net trust in European Central Bank (Model I) and net support for the Euro (Model II). The research was conducted on quarterly panel data of the EU countries from the euro area covering the period from 2000 to 2019. Logit regressions employed for data processing and analysis were performed in the computational system STATISTICA.
 Findings & value added: The logit-modeling results show that determinants of irrational real estate buyers' behavior are powerless in predicting the escalation of the trust crisis in the Euro. However, binary models of real estate market behavior could be successfully used to predict the probability of the trust crisis in the European Central Bank. The results show that real house price indices, price to income ratio, price to rent ratio, and rent prices accompanied by the financial sector consumers' feelings are statistically significant, providing the best distribution between the normal times and periods of trust crisis in the European Central Bank. Irrational real estate market behavior may indicate serious problems in the trust violations in the European Central Bank, and it should be a signal for policymakers to take actions towards more efficient financial and real estate market regulation following the behavioral approach.
Highlights
Macroeconomic stability and development have long been a question of great interest in a wide range of fields over the years and do not diminish its relevance (Vasilyeva et al, 2019; Bilan et al, 2020, Zolkover & Renkas, 2020)
Where β' are values of coefficients estimated from the dataset by maximizing the log-likelihood function, xi represents the value of vector of indicators that describes the real estate market behavior, μi is an error term, and Zi is the probability of the trust crisis in the financial sector
In Model I, the real estate market behavior was incorporated along with financial sector consumers' feelings to predict the trust crisis in the European Central Bank that is responsible for carrying out monetary policy and ensuring financial system stability in the euro area
Summary
Macroeconomic stability and development have long been a question of great interest in a wide range of fields over the years and do not diminish its relevance (Vasilyeva et al, 2019; Bilan et al, 2020, Zolkover & Renkas, 2020). The selection of the trust crisis indicators is based on variables that clearly depict the trust crisis in the financial sector as they reflect trust violations in the financial system primary institutions — net trust in European Central Bank (Model I) and net support for the Euro (Model II) In both models real estate market behavior (narrow) was incorporated along with financial sector consumers' feelings (extended) to predict the trust crisis in the European Central Bank and the Euro. The section elaborates on the data description, measurement of different variables, research model, and methodology to predict the trust crisis in the financial sector This is followed by empirical findings for all predicting models with narrow and extended data, accuracy classification, and study results discussion. The final section is devoted to the conclusion, empirical implications, and future research directions
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
