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The international transmission of house price shocks

  • de Bandt, O.
  • Barhoumi, K.
  • Bruneau, C.

In order to assess transmission mechanisms between global and domestic house prices, and possibly contagion effects, we use a large database of macroeconomic variables for OECD countries. We extract common factors to summarize the comovements of the variables and include them in stationary FAVAR models. We mainly focus on the "pandemic" view of contagion where local shocks, originating from a country or a local housing market, spread out to other domestic housing markets. An interesting finding is that, even allowing for other channels of international transmission (through global interest rates, or activity), the US real house price, which appears to be exogenous in the US dynamics, unidirectionally causes the international house price factor, which in turn causes the domestic real house price growth for several countries. The channels of contagion from the US appears therefore to be either direct, through house prices (in particular in the UK or Spain), or indirect through other variables.

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Paper provided by Banque de France in its series Working papers with number 274.

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Length: 34 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:bfr:banfra:274
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/

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  1. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the effects of monetary policy: a factor-augmented vector autoregressive (FAVAR) approach," Finance and Economics Discussion Series 2004-03, Board of Governors of the Federal Reserve System (U.S.).
  2. Otrok, C. & Whiteman, C.H., 1996. "Bayesian Leading Indicators: Measuring and Predicting Economic Conditions in Iowa," Working Papers 96-14, University of Iowa, Department of Economics.
  3. James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
  4. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2010. "Winners and Losers in House Markets," Working Papers 2010-5, Central Bank of Cyprus.
  5. Marco Del Negro & Christopher Otrok, 2005. "Monetary policy and the house price boom across U.S. states," Working Paper 2005-24, Federal Reserve Bank of Atlanta.
  6. Francois Ortalo-Magne & Andrea Prat, 2010. "Spatial Asset Pricing: A First Step," STICERD - Theoretical Economics Paper Series 546, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  7. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September.
  8. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
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