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(Un)expected housing price changes: Identifying the drivers of small business finance

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  • Kapinos, Pavel
  • Gurley-Calvez, Tami
  • Kapinos, Kandice

Abstract

In this paper, we use the Kauffman Firm Survey to examine the effect of housing price changes on small business financial variables. We apply macroeconomic forecasting techniques to decompose housing price changes into expected and unexpected components. In addition to investigating the effect of predictable and unpredictable movements in housing prices, we argue that our use of forecast errors allows us to identify plausibly exogenous variation in housing prices. We show that for several measures of small business financing, the unexpected housing price changes have particularly large effects on small business balance sheets. Analysis of specific measures of credit access points to the channels of transmission of housing market disruptions on small business outcomes and suggests that small business owners absorb negative shocks to housing wealth through relatively expensive sources of credit and not through loans from the banking sector. We conclude with policy proposals for reducing the effect of housing market disruptions on small businesses.

Suggested Citation

  • Kapinos, Pavel & Gurley-Calvez, Tami & Kapinos, Kandice, 2016. "(Un)expected housing price changes: Identifying the drivers of small business finance," Journal of Economics and Business, Elsevier, vol. 84(C), pages 79-94.
    • Handle: RePEc:eee:jebusi:v:84:y:2016:i:c:p:79-94
    DOI: 10.1016/j.jeconbus.2016.02.002
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    2. Abounoori , Esmaiel & Abdoh Tabrizi , Hossein & Mahmoodi , Nooshin, 2017. "The Effect of Divorce on Urban Housing Costs in Iran: A Spatial Autocorrelation Model," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 12(2), pages 107-122, April.

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    More about this item

    Keywords

    D14; G17; Small business finance; House price changes; Forecasting;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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