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Booms and busts in housing markets: Determinants and implications

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  • Agnello, Luca
  • Schuknecht, Ludger

Abstract

This study looks at the characteristics and determinants of booms and busts in housing prices for a sample of eighteen industrialised countries over the period 1980-2007. From an historical perspective, we find that recent housing booms have been amongst the longest in the past four decades. Estimates of a Multinomial Probit model suggest that domestic credit and interest rates have a significant influence on the probability of booms and busts occurring. Moreover, international liquidity plays a significant role for the occurrence of housing booms and--in conjunction with banking crises--for busts. We also find that the deregulation of financial markets has strongly magnified the impact of the domestic financial sector on the occurrence of booms.

Suggested Citation

  • Agnello, Luca & Schuknecht, Ludger, 2011. "Booms and busts in housing markets: Determinants and implications," Journal of Housing Economics, Elsevier, vol. 20(3), pages 171-190, September.
  • Handle: RePEc:eee:jhouse:v:20:y:2011:i:3:p:171-190
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    More about this item

    Keywords

    Housing prices Booms and busts Monetary policies Credit growth Global liquidity Financial deregulation;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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