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News and noise bubbles in the housing market

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  • Andrea Gazzani

    (European University Institute)

Abstract

Employing a non-standard VAR technique, I decompose house price movements into news and noise shocks and I analyze their macroeconomic effects in the US between 1963 and 2016. News shocks are identified as disturbances that induce a lagged permanent effect on rents, the key fundamental in the housing market, while noise shocks are assumed to move house prices without affecting rents. News shocks are the main driver of the US housing market in the long-run. However, noise shocks explain a large share of house prices volatility and they have a non-negligible effect on residential investment and GDP over short and medium horizons. Noise shocks contributed to all housing cycles since the '60s, including the boom-bust episode of 2001-2009. (Copyright: Elsevier)

Suggested Citation

  • Andrea Gazzani, 2020. "News and noise bubbles in the housing market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 46-72, April.
    • Handle: RePEc:red:issued:18-262
    DOI: 10.1016/j.red.2019.08.001
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    Cited by:

    1. Jonathan J Adams, 2021. "Firestorm: Multiplicity in Models with Full Information," Working Papers 001006, University of Florida, Department of Economics.
    2. Adams, Jonathan J., 2023. "Moderating noise-driven macroeconomic fluctuations under dispersed information," Journal of Economic Dynamics and Control, Elsevier, vol. 156(C).
    3. Ryan Chahrour & Gaetano Gaballo, 2021. "Learning from House Prices: Amplification and Business Fluctuations [House Price Booms and the Current Account]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(4), pages 1720-1759.
    4. Jonathan Adams & Philip Barrett, 2024. "Shocks to Inflation Expectations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 54, October.
    5. Lukasz Mach & Dariusz Zmarzly & Ireneusz Dabrowski & Pawel Fracz, 2020. "Comparison on Subannual Seasonality of Building Construction in European Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 241-257.
    6. Jonathan J Adams, 2020. "Moderating Macroeconomic Bubbles Under Dispersed Information," Working Papers 001005, University of Florida, Department of Economics.

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    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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