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House Prices and Business Cycles in Europe: a VAR Analysis

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  • Matteo Iacoviello

    ()

    (Boston College)

Abstract

A structural vector autoregressive approach identifies the main macroeconomic factors behind fluctuations in house prices in France, Germany, Italy, Spain, Sweden and the UK. Quarterly GDP, house prices, money, inflation and interest rates are characterised by a multivariate process driven by supply, nominal, monetary, inflationary and demand shocks. Tight money leads to a fall in real house prices; house price responses are hump-shaped; the responses of house prices and, to a lesser extent, GDP to a monetary shock can be partly justified by the different housing and financial market institutions across countries; transitory shocks drive a significant part of short-run house price fluctuations.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 540.

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Length: 43 pages
Date of creation: 03 Oct 2002
Date of revision:
Handle: RePEc:boc:bocoec:540
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Keywords: house prices; structural VAR; monetary policy;

Find related papers by JEL classification:

  • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
  • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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