The international transmission of house price shocks
AbstractIn order to assess transmission mechanisms between global and domestic house prices, and possibly contagion effects, we use a large database of macroeconomic variables for OECD countries. We extract common factors to summarize the comovements of the variables and include them in stationary FAVAR models. We mainly focus on the "pandemic" view of contagion where local shocks, originating from a country or a local housing market, spread out to other domestic housing markets. An interesting finding is that, even allowing for other channels of international transmission (through global interest rates, or activity), the US real house price, which appears to be exogenous in the US dynamics, unidirectionally causes the international house price factor, which in turn causes the domestic real house price growth for several countries. The channels of contagion from the US appears therefore to be either direct, through house prices (in particular in the UK or Spain), or indirect through other variables.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 274.
Length: 34 pages
Date of creation: 2010
Date of revision:
housing; factor models; Vector Autoregressive model.;
Find related papers by JEL classification:
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-11 (All new papers)
- NEP-CBA-2010-04-11 (Central Banking)
- NEP-EEC-2010-04-11 (European Economics)
- NEP-IFN-2010-04-11 (International Finance)
- NEP-URE-2010-04-11 (Urban & Real Estate Economics)
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