IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Homes and Cars: Why are the Cycles in Homes and Consumer Durables so Similar?

Listed author(s):
  • Leamer Edward E

    ()

    (UCLA)

This paper reports three sets of facts: 1) Declines in housing are very good predictors of oncoming recessions in the U.S.; 2) Housing and consumer durables are the most important components of GDP that are soft prior to the official beginnings of recessions, and these two contribute substantially to weakness during recessions; and 3) The cycles in homes and consumer durables are very close, raising the prospect that a monetary rule that targeted housing would alleviate the cycle in consumer durables as well; this is confirmed in an econometric exercise with rates set to stabilize housing starts.These facts are used to argue in favor of monetary policy that prevents excessive building of homes and cars with preemptive rate increases in the middle of expansions when housing starts are above normal and growing higher. This contrasts with the traditional approach which is to raise rates late in expansions when inflation is apparent, but when the markets for homes and durables are very fragile because of excessive building earlier.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.degruyter.com/view/j/bejeap.2009.9.3/bejeap.2009.9.3.2243/bejeap.2009.9.3.2243.xml?format=INT
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 9 (2009)
Issue (Month): 3 (March)
Pages: 1-66

as
in new window

Handle: RePEc:bpj:bejeap:v:9:y:2009:i:3:n:5
Contact details of provider: Web page: https://www.degruyter.com

Order Information: Web: https://www.degruyter.com/view/j/bejeap

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
  2. Matthias Doepke & Martin Schneider, 2006. "Inflation and the Redistribution of Nominal Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1069-1097, December.
  3. David M. Blank, 1954. "Introduction to "The Volume of Residential Construction, 1889-1950"," NBER Chapters,in: The Volume of Residential Construction, 1889-1950, pages 1-4 National Bureau of Economic Research, Inc.
  4. Sherman J. Maisel, 1968. "The Effects of Monetary Policy on Expenditures in Specific Sectors of the Economy," Journal of Political Economy, University of Chicago Press, vol. 76, pages 796-796.
  5. Margaret M. McConnell & Gabriel Perez-Quiros, 2000. "Output fluctuations in the United States: what has changed since the early 1980s?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  6. Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
  7. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
  8. Andrew Levin & Volker Wieland & John C. Williams, 2003. "The Performance of Forecast-Based Monetary Policy Rules Under Model Uncertainty," American Economic Review, American Economic Association, vol. 93(3), pages 622-645, June.
  9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
  10. Eugene A. Brady, 1967. "A Sectoral Econometric Study of the Postwar Residential-Housing Market," Journal of Political Economy, University of Chicago Press, vol. 75, pages 147-147.
  11. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1233-1260.
  12. Stephen G Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2005. "Assessing the Sources of Changes in the Volatility of Real Growth," RBA Annual Conference Volume,in: Christopher Kent & David Norman (ed.), The Changing Nature of the Business Cycle Reserve Bank of Australia.
  13. William W. Alberts, 1962. "Business Cycles, Residential Construction Cycles, and the Mortgage Market," Journal of Political Economy, University of Chicago Press, vol. 70, pages 263-263.
  14. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, October.
  15. Smith, Lawrence B & Rosen, Kenneth T & Fallis, George, 1988. "Recent Developments in Economic Models of Housing Markets," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 29-64, March.
  16. Oecd, 2006. "Are House Prices Nearing a Peak?: A Probit Analysis for 17 OECD Countries," OECD Economics Department Working Papers 488, OECD Publishing.
  17. Moses Abramovitz, 1964. "Evidences of Long Swings in Aggregate Construction Since the Civil War," NBER Books, National Bureau of Economic Research, Inc, number abra64-1, October.
  18. Rose Cunningham & Ilan Kolet, 2007. "Housing Market Cycles and Duration Dependence in the United States and Canada," Staff Working Papers 07-2, Bank of Canada.
  19. Richard K. Green, 1997. "Follow the Leader: How Changes in Residential and Non-residential Investment Predict Changes in GDP," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(2), pages 253-270.
  20. Bach, G L & Stephenson, James B, 1974. "Inflation and the Redistribution of Wealth," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 1-13, February.
  21. Jonas D. M. Fisher, 2007. "Why Does Household Investment Lead Business Investment over the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 115, pages 141-168.
  22. David M. Blank, 1954. "The Volume of Residential Construction, 1889-1950," NBER Books, National Bureau of Economic Research, Inc, number blan54-1, October.
  23. Karl E. Case, 1986. "The market for single-family homes in the Boston area," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 38-48.
  24. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:9:y:2009:i:3:n:5. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.