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House prices and sectoral output: A cross-country analysis

Author

Listed:
  • Bahadir, Berrak
  • Gumus, Inci
  • Tatar Taspinar, Zeren

Abstract

This paper empirically analyzes the medium-run impact of house price fluctuations on sectoral output dynamics. Using an unbalanced panel of 47 countries, we find that house price expansions negatively affect the tradable sector, with no significant impact on the nontradable sector. Our results further show that house price expansions lead to real exchange rate appreciation, which raises domestic costs and diminishes the country’s competitiveness in international markets. We also study the importance of exchange rate flexibility for the link between house prices and sectoral output and show that the negative impact on the tradable sector is less pronounced in countries with more flexible exchange rate regimes, highlighting the importance of the real exchange rate’s response to house price changes.

Suggested Citation

  • Bahadir, Berrak & Gumus, Inci & Tatar Taspinar, Zeren, 2025. "House prices and sectoral output: A cross-country analysis," Economics Letters, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000758
    DOI: 10.1016/j.econlet.2025.112238
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    References listed on IDEAS

    as
    1. Bahadir, Berrak & Gumus, Inci, 2022. "House prices, collateral effects and sectoral output dynamics in emerging market economies," Journal of International Money and Finance, Elsevier, vol. 129(C).
    2. Atif Mian & Amir Sufi & Emil Verner, 2017. "Household Debt and Business Cycles Worldwide," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1755-1817.
    3. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    4. Philipp Harms & Jakub Knaze, 2021. "Effective Exchange Rate Regimes and Inflation," Working Papers 2102, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    5. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    House prices; Tradable sector; Nontradable sector; Real exchange rate;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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