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A retrospective analysis of the house prices macro-relationship in the United States

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  • Ahamada, Ibrahim
  • Diaz Sanchez, Jose Luis

Abstract

This study provides empirical evidence on the strengthening of the impact of house prices on the US macroeconomy. The stability of the house prices macro-link is tested in a small-dimensional vector autoregressive model over the last fifty years. The estimated break-points are used to split the sample into different segments and a multivariate time series analysis is performed within subsamples. The paper finds a robust structural break in the mid-1980s. In addition, time series analysis across segments provides evidence that the effect of house prices, not only on private consumption, but also on economic activity, has intensified since the mid-1980s.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6549.

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Date of creation: 01 Jul 2013
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Handle: RePEc:wbk:wbrwps:6549

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Keywords: Markets and Market Access; Economic Theory&Research; Financial Intermediation; Emerging Markets; Housing Finance;

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  1. Matteo Iacoviello & Stefano Neri, 2008. "Housing market spillovers : evidence from an estimated DSGE model," Working Paper Research 145, National Bank of Belgium.
  2. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
  3. Kristopher S. Gerardi & Harvey S. Rosen & Paul S. Willen, 2010. "The Impact of Deregulation and Financial Innovation on Consumers: The Case of the Mortgage Market," Journal of Finance, American Finance Association, vol. 65(1), pages 333-360, 02.
  4. Elias Oikarinen, 2008. "Interaction between housing prices and household borrowing - the Finnish case," Discussion Papers 29, Aboa Centre for Economics.
  5. Zhongjun Qu & Pierre Perron, 2005. "Estimating and testing structural changes in multivariate regressions," Boston University - Department of Economics - Working Papers Series WP2005-012, Boston University - Department of Economics.
  6. Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
  7. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  8. Filippo Altissimo & Evaggelia Georgiou & Teresa Sastre & Maria Teresa Valderrama & Gabriel Sterne & Marc Stocker & Mark Weth & Karl Whelan & Alpo Willman, 2005. "Wealth and asset price effects on economic activity," Occasional Paper Series 29, European Central Bank.
  9. Norman Miller & Liang Peng & Michael Sklarz, 2011. "House Prices and Economic Growth," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 522-541, May.
  10. Calza, Alessandro & Stracca, Livio & Monacelli, Tommaso, 2009. "Housing finance and monetary policy," Working Paper Series 1069, European Central Bank.
  11. Kurozumi, Eiji & Tuvaandorj, Purevdorj, 2011. "Model selection criteria in multivariate models with multiple structural changes," Journal of Econometrics, Elsevier, vol. 164(2), pages 218-238, October.
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