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Housing cycles in the major euro area countries

Author

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  • Álvarez, L-J.
  • Bulligan, G.
  • Cabrero, A.
  • Ferrara, L.
  • Stahl, H.

Abstract

The recent burst of the house price bubble in the United States and its spillover effects on real economies worldwide has rekindled the interest in the role of housing in the business cycle. In this paper, we investigate the relationships between housing cycles among the four major euro area countries (Germany, France, Italy and Spain) over the sample 1980q1 – 2008q4. Our main findings are that GDP cycles between 1.5 and 8 years show a high degree of comovement across these four countries, reflecting trade linkages. In contrast comovements in housing market cycles between 1.5 and 8 years are much weaker, idiosyncratic factors playing a major role. House prices are even less related across countries than quantities (residential investment, building permits, housing starts …). We find however much stronger relationships since 1999, i.e. in the common monetary policy period.

Suggested Citation

  • Álvarez, L-J. & Bulligan, G. & Cabrero, A. & Ferrara, L. & Stahl, H., 2009. "Housing cycles in the major euro area countries," Working papers 269, Banque de France.
  • Handle: RePEc:bfr:banfra:269
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    References listed on IDEAS

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    1. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
    2. Knetsch, Thomas A., 2010. "Trend and cycle features in German residential investment before and after reunification," Discussion Paper Series 1: Economic Studies 2010,10, Deutsche Bundesbank.
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    7. Pilar Bengoechea & Gabriel Pérez-Quirós, 2004. "A useful tool to identify recessions in the euro-area," Working Papers 0419, Banco de España;Working Papers Homepage.
    8. Luis J. Álvarez & Alberto Cabrero, 2010. "Does housing really lead the business cycle?," Working Papers 1024, Banco de España;Working Papers Homepage.
    9. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
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    12. Peter Hoeller & David Rae, 2007. "Housing Markets and Adjustment in Monetary Union," OECD Economics Department Working Papers 550, OECD Publishing.
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    Citations

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    Cited by:

    1. Aye, Goodness C. & Balcilar, Mehmet & Bosch, Adél & Gupta, Rangan, 2014. "Housing and the business cycle in South Africa," Journal of Policy Modeling, Elsevier, vol. 36(3), pages 471-491.
    2. Cesa-Bianchi, Ambrogio, 2013. "Housing cycles and macroeconomic fluctuations: A global perspective," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 215-238.
    3. Klaus Schmidt-Hebbel, 2011. "Central banking in Latin America: changes, achievements, challenges," Occasional Papers 1102, Banco de España;Occasional Papers Homepage.
    4. Emmanuelle Lavallée & Vincent Vicard, 2013. "National borders matterwhere one draws the lines too," Canadian Journal of Economics, Canadian Economics Association, vol. 46(1), pages 135-153, February.
    5. Laurent Maurin & Moreno Roma & Igor Vetlov, 2011. "Profit Dynamics across the Largest Euro Area countries and Sectors," Bank of Lithuania Working Paper Series 12, Bank of Lithuania.
    6. Rangan Gupta & Christophe André & Luis Gil-Alana, 2015. "Comovement in Euro area housing prices: A fractional cointegration approach," Urban Studies, Urban Studies Journal Limited, vol. 52(16), pages 3123-3143, December.
    7. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok & Marco E Terrones, 2013. "Global House Price Fluctuations: Synchronization and Determinants," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 9(1), pages 119-166.
    8. Ferrara, L. & Koopman, S J., 2010. "Common business and housing market cycles in the Euro area from a multivariate decomposition," Working papers 275, Banque de France.
    9. Knetsch, Thomas A., 2010. "Trend and cycle features in German residential investment before and after reunification," Discussion Paper Series 1: Economic Studies 2010,10, Deutsche Bundesbank.
    10. Sonsoles Gallego & Sándor Gardó & Reiner Martin & Luis Molina & José María Serena, 2010. "The Impact of the Global Economic and Financial Crisis on Central Eastern and SouthEastern Europe (CESEE) and Latin America," Occasional Papers 1002, Banco de España;Occasional Papers Homepage.
    11. Luis J. Álvarez & Alberto Cabrero, 2010. "Does housing really lead the business cycle?," Working Papers 1024, Banco de España;Working Papers Homepage.
    12. Young Il Kim, 2014. "Housing and business cycles in Korea: assessing the role of housing volume cycles," Chapters,in: The Global Financial Crisis and Housing, chapter 3, pages 40-61 Edward Elgar Publishing.
    13. Ferrara, L. & Vigna, O., 2009. "Cyclical relationships between GDP and housing market in France: Facts and factors at play," Working papers 268, Banque de France.

    More about this item

    Keywords

    Housing cycles; synchronisation measures; euro area countries.;

    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
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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