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Housing Dynamics over the Business Cycle

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  • Finn E. Kydland
  • Peter Rupert
  • Roman Sustek

Abstract

Over the U.S. business cycle, fluctuations in residential investment are well known to systematically lead GDP. These dynamics are documented here to be specific to the U.S. and Canada. In other developed economies residential investment is broadly coincident with GDP. Nonresidential investment has the opposite dynamics, being coincident with or lagging GDP. These observations are in sharp contrast with the properties of nearly all business cycle models with disaggregated investment. Including mortgages and interest rate dynamics aligns the theory more closely with U.S. observations. Longer time to build in housing construction makes residential investment coincident with output.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18432.

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Date of creation: Oct 2012
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Handle: RePEc:nbr:nberwo:18432

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Citations

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Cited by:
  1. Carlos Garriga & Finn E. Kydland & Roman Å ustek, 2013. "Mortgages and Monetary Policy," Discussion Papers 1306, Centre for Macroeconomics (CFM).
  2. Michal Brzoza-Brzezina, 2014. "Financial Frictions and Macroprudential Policy," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 10(2), pages 249-261, June.
  3. Aye, Goodness C. & Balcilar, Mehmet & Bosch, Adél & Gupta, Rangan, 2014. "Housing and the business cycle in South Africa," Journal of Policy Modeling, Elsevier, Elsevier, vol. 36(3), pages 471-491.
  4. Walentin, Karl, 2013. "Business Cycle Implications of Mortgage Spreads," Working Paper Series 275, Sveriges Riksbank (Central Bank of Sweden), revised 01 Mar 2014.

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