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Sources of Fluctuations in the Housing Market

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  • Kim Myeong-Soo
  • N. Edward Coulson

Abstract

In this study, sources of economic fluctuations in the housing market are investigated using U.S. data. A structural VAR (vector autoregressive) model is set up with a new method of ordering the residuals introduced by swanson and granger (1997) that is based on an analysis of the contemporaneous error structure. To specify the sources of fluctuations in the housing market, several important innovations are included in the model: a marginal income tax rate shock, an interest rate shock, a factor cost shock, a housing supply shock, an income shock, a housing demand shock,a residential price shock, and a housing price shock. Empirical results show that the interest rate shock appears to be the most significant innovation among all shocks, although the marginal federal income tax rate shock, the housing price shock, and the factor price for housing supply shock also play important roles in explaininig fluctuations in the housing market. [R0,R1]

Suggested Citation

  • Kim Myeong-Soo & N. Edward Coulson, 1999. "Sources of Fluctuations in the Housing Market," International Economic Journal, Taylor & Francis Journals, vol. 13(1), pages 57-70.
  • Handle: RePEc:taf:intecj:v:13:y:1999:i:1:p:57-70
    DOI: 10.1080/10168739900000029
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    References listed on IDEAS

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    1. Rosen, Harvey S & Rosen, Kenneth T, 1980. "Federal Taxes and Homeownership: Evidence from Time Series," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 59-75, February.
    2. DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
    3. Barro, Robert J & Sahasakul, Chaipat, 1983. "Measuring the Average Marginal Tax Rate from the Individual Income Tax," The Journal of Business, University of Chicago Press, vol. 56(4), pages 419-452, October.
    4. James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 729-752.
    5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    6. Mankiw, N. Gregory & Weil, David N., 1989. "The baby boom, the baby bust, and the housing market," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 235-258, May.
    7. Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-740, August.
    8. Swanson, N.R. & Granger, C.W.J., 1994. "Impulse Response Functions Based on Causal Approach to Residual Orthogonalization in Vector Autoregressions," Papers 9-94-1, Pennsylvania State - Department of Economics.
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