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House prices and the macroeconomy in Europe: Results from a structural var analysis


  • Iacoviello, Matteo


A structural vector autoregressive (SVAR) approach is used to identify the forces driving house prices fluctuations in France, Germany, Italy, Spain, Sweden and the UK over the period 1970-1998. Quarterly time series for real house prices, GDP, money, inflation and interest rates are characterised by a multivariate process driven by supply, nominal, monetary, inflationary and demand shocks. It is found that: (1) tight money leads to a concomitant fall in house prices and GDP; (2) the house price responses to a monetary shock can be partly justified by the different housing and financial market institutions across countries; (3) monetary and demand shocks drive most of the short-run house price volatility. The paper also interprets the main house price cycles and their links with the real economy in light of the estimates shocks. JEL Classification: C32, E32, E52, R21

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  • Iacoviello, Matteo, 2000. "House prices and the macroeconomy in Europe: Results from a structural var analysis," Working Paper Series 0018, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20000018

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    Cited by:

    1. repec:dgr:rugccs:200411 is not listed on IDEAS
    2. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    3. Michal Hlavacek & Lubos Komarek, 2009. "Housing Price Bubbles and their Determinants in the Czech Republic and its Regions," Working Papers 2009/12, Czech National Bank, Research Department.
    4. Lastrapes, William D. & Potts, Todd B., 2006. "Durable goods and the forward-looking theory of consumption: Estimates implied by the dynamic effects of money," Journal of Economic Dynamics and Control, Elsevier, vol. 30(8), pages 1409-1430, August.
    5. repec:beo:journl:v:62:y:2017:i:215:p:81-110 is not listed on IDEAS
    6. Christophe Blot, 2006. "Peut-on parler de bulle sur le marché immobilier au Luxembourg ?," BCL working papers 20, Central Bank of Luxembourg.
    7. Robert S. Chirinko & Leo de Haan & Elmer Sterken, 2004. "Asset Price Shocks, Real Expenditures, and Financial Structure: A Multi-Country Analysis," DNB Working Papers 014, Netherlands Central Bank, Research Department.
    8. Massimo GIULIODORI, 2002. "Monetary Policy Shocks and the Role of House Prices Across European Countries," Working Papers 164, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    9. Demary, Markus, 2009. "The Link between Output, Inflation, Monetary Policy and Housing Price Dynamics," MPRA Paper 15978, University Library of Munich, Germany.
    10. Musso, Alberto & Neri, Stefano & Stracca, Livio, 2011. "Housing, consumption and monetary policy: How different are the US and the euro area?," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 3019-3041, November.
    11. Koivu, Tuuli, 2012. "Monetary policy, asset prices and consumption in China," Economic Systems, Elsevier, vol. 36(2), pages 307-325.
    12. Sterken, Elmer, 2003. "Monetary transmission, asset prices, and the business cycle indicator in Germany," CCSO Working Papers 200315, University of Groningen, CCSO Centre for Economic Research.
    13. Diana Kasparova, Michael White, 2001. "The Responsiveness Of House Prices To Macroeconomic Forces: A Cross-Countr Y Comparison," European Journal of Housing Policy, Taylor and Francis Journals, vol. 1(3), pages 385-416, December.
    14. Renée A. Fry & Vance L. Martin & Nicholas Voukelatos, 2010. "Overvaluation in Australian Housing and Equity Markets: Wealth Effects or Monetary Policy?," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 465-485, December.
    15. repec:kap:iaecre:v:14:y:2008:i:4:p:407-421 is not listed on IDEAS
    16. Michael Haliassos & Pany Karamanou & Constantinos Ktoris & George Syrichas, 2008. "Mortgage Debt, Social Customs,and Financial Innovation," Working Papers 2008-2, Central Bank of Cyprus.
    17. Romuald Morhs, 2010. "Monetary Policy Transmission and Macroeconomic Dynamics in Luxembourg: Results from a VAR Analysis," BCL working papers 49, Central Bank of Luxembourg.
    18. Elmer Sterken, 2004. "The Role of the IFO Business Climate Indicator and Asset Prices in German Monetary Policy," CESifo Working Paper Series 1204, CESifo Group Munich.
    19. Koivu, Tuuli, 2010. "Monetary policy, asset prices and consumption in China," BOFIT Discussion Papers 18/2010, Bank of Finland, Institute for Economies in Transition.
    20. Khiabani, Nasser, 2010. "How Important are Oil and Money Shocks in Explaining Housing Market Fluctuations in an Oil-exporting Country?: Evidence from Iran," MPRA Paper 34041, University Library of Munich, Germany, revised 01 Mar 2011.

    More about this item

    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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