Housing And The Business Cycle

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Housing And The Business Cycle

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Morris A. Davis
Jonathan Heathcote

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Abstract

In the United States, the percentage standard deviation of residential investment is more than twice that of nonresidential investment. In addition, GDP, consumption, and both types of investment co-move positively. We reproduce these facts in a calibrated multisector growth model where construction, manufacturing, and services are combined, in different proportions, to produce consumption, business investment, and residential structures. New housing requires land in addition to new structures. The model can also account for important features of industry-level data. In particular, hours and output in all industries are positively correlated, and are most volatile in construction. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 46 (2005)
Issue (Month): 3 (08)
Pages: 751-784
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Handle: RePEc:ier:iecrev:v:46:y:2005:i:3:p:751-784

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Paper
- Morris Davis & Jonathan Heathcote, 2004. "Housing and the business cycle," Finance and Economics Discussion Series 2004-11, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
- Davis, Morris & Heathcote, Jonathan, 2001. "Housing and the Business Cycle," Working Papers 01-09, Duke University, Department of Economics. [Downloadable!]
- Jonathan Heathcote, 2003. "Housing and the Business Cycle," Working Papers gueconwpa~03-03-21, Georgetown University, Department of Economics. [Downloadable!]

References listed on IDEAS
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Other versions:
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Other versions:
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