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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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Paper provided by European Central Bank in its series Working Paper Series with number 0018.

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Date of creation: Apr 2000
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Handle: RePEc:ecb:ecbwps:20000018
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