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The impacts of fiscal policy shocks on the US housing market

Author

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  • Isabel Ruiz

    () (University of Oxford)

  • Carlos Vargas-Silva

    () (University of Oxford)

Abstract

Abstract We explore empirically the impact of fiscal policy shocks on the US housing market using a vector autoregressive model. Identification is achieved through sign restrictions. Accounting for announcement effects, a revenue shock has a short-lived positive impact on house prices and indicators of housing activity. The impact of a spending shock on housing activity is negative and more persistent, but there is no substantial response from house prices. A balanced budget spending expansion (i.e. 1 % increases in spending and revenue) has a short-lived negative impact on housing activity and a very persistent negative impact on house prices. The paper presents results from other combinations of the two shocks. Results are generally robust to only using data for the post-financial liberalization period (i.e. since 1983).

Suggested Citation

  • Isabel Ruiz & Carlos Vargas-Silva, 2016. "The impacts of fiscal policy shocks on the US housing market," Empirical Economics, Springer, vol. 50(3), pages 777-800, May.
  • Handle: RePEc:spr:empeco:v:50:y:2016:i:3:d:10.1007_s00181-015-0961-8
    DOI: 10.1007/s00181-015-0961-8
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    References listed on IDEAS

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    Cited by:

    1. Rangan Gupta & Chi Keung Marco Lau & Stephen M. Miller & Mark E. Wohar, 2017. "U.S. Fiscal Policy and Asset Prices: The Role of Partisan Conflict," Working papers 2017-10, University of Connecticut, Department of Economics.

    More about this item

    Keywords

    Housing; Fiscal policy; VAR;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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