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Housing Construction Cycles and Interest Rates

Author

Listed:
  • Luci Ellis
  • Laura Berger-Thomson

Abstract

Housing investment is one of the most cyclical components of GDP. Much of that cyclicality stems from the sector's sensitivity to interest rates, but it is also possible that construction lags generate intrinsic cyclicality in this sector. Although the housing sector is generally considered to be more interest-sensitive than the economy as a whole, the degree of this sensitivity seems to vary between countries and through time. In this paper, we model the housing markets in Australia, the United States, the United Kingdom and Canada using a structural three-stage least-squares system. We document the variations in the housing sector's cyclicality and sensitivity to movements in interest rates, and attempt to determine the underlying causes of these differences.

Suggested Citation

  • Luci Ellis & Laura Berger-Thomson, 2004. "Housing Construction Cycles and Interest Rates," Econometric Society 2004 Australasian Meetings 335, Econometric Society.
    • Handle: RePEc:ecm:ausm04:335
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    Cited by:

    1. Goodness C. Aye & Stephen M. Miller & Rangan Gupta & Mehmet Balcilar, 2016. "Forecasting US real private residential fixed investment using a large number of predictors," Empirical Economics, Springer, vol. 51(4), pages 1557-1580, December.
    2. David E. Dowall & Peter D. Ellis, 2009. "Urban Land and Housing Markets in the Punjab, Pakistan," Urban Studies, Urban Studies Journal Limited, vol. 46(11), pages 2277-2300, October.
    3. Katarzyna Budnik & Michal Greszta & Michal Hulej & Marcin Kolasa & Karol Murawski & Michal Rot & Bartosz Rybaczyk & Magdalena Tarnicka, 2009. "The new macroeconometric model of the Polish economy," NBP Working Papers 62, Narodowy Bank Polski.
    4. repec:ipg:wpaper:2014-465 is not listed on IDEAS
    5. Luci Ellis, 2006. "Housing and Housing Finance: The View from Australia and Beyond," RBA Research Discussion Papers rdp2006-12, Reserve Bank of Australia.
    6. Gabriele Galati & Federica Teppa & Rob Alessie, 2013. "Heterogeneity in house price dynamics," DNB Working Papers 371, Netherlands Central Bank, Research Department.
    7. Luci Ellis & Mariano Kulish & Stephanie Wallace, 2012. "Property Market Cycles as Paths to Financial Distress," RBA Annual Conference Volume (Discontinued), in: Alexandra Heath & Frank Packer & Callan Windsor (ed.),Property Markets and Financial Stability, Reserve Bank of Australia.
    8. Stephen Mak & Lennon Choy & Winky Ho, 2012. "Region-specific Estimates of the Determinants of Real Estate Investment in China," Urban Studies, Urban Studies Journal Limited, vol. 49(4), pages 741-755, March.
    9. Harry M. Karamujic, 2011. "Comparative Analysis of Australian Residential Mortgage (Home Loan) Interest Rates," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(3), pages 311-341, August.
    10. Erol, Isil & Unal, Umut, 2015. "Role of Construction Sector in Economic Growth: New Evidence from Turkey," MPRA Paper 68263, University Library of Munich, Germany.
    11. John Jairo García & Nathalia Cadavid & �rika Aristiz�bal, 2018. "Efectos del crédito hipotecario sobre el precio de la vivienda nueva NO VIS en Medellín," Documentos de Trabajo de Valor Público 17009, Universidad EAFIT.
    12. World Bank, 2006. "Urban Land and Housing Markets in the Punjab, Pakistan," World Bank Publications - Reports 8280, The World Bank Group.
    13. Chin-Oh Chang & Ming-Chi Chen, 2014. "Construction financing in Taiwan: current state and policy regime," Chapters, in: Susan Wachter & Man Cho & Moon Joong Tcha (ed.), The Global Financial Crisis and Housing, chapter 8, pages 180-207, Edward Elgar Publishing.
    14. Trent Saunders & Peter Tulip, 2020. "A Model of the Australian Housing Market," The Economic Record, The Economic Society of Australia, vol. 96(S1), pages 1-25, June.
    15. Gabriele Galati & Federica Teppa & Rob Alessie, 2011. "Macro and micro drivers of house price dynamics: An application to Dutch data," DNB Working Papers 288, Netherlands Central Bank, Research Department.
    16. Luci Ellis, 2010. "The Housing Meltdown: Why Did It Happen in the United States?," International Real Estate Review, Global Social Science Institute, vol. 13(3), pages 351-394.
    17. Faith Kanjumba & Amos Njuguna & George Achoki, 2016. "Economic Factors Influence on Funding of the Supply-Side of Housing in Kenya: Case Study Nairobi," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(10), pages 194-194, September.
    18. Naik, Prasad A., 2015. "Marketing Dynamics: A Primer on Estimation and Control," Foundations and Trends(R) in Marketing, now publishers, vol. 9(3), pages 175-266, December.
    19. Nicholas Apergis & Ghassen El Montasser & Emmanuel Owusu-Sekyere & Ahdi N. Ajmi & Rangan Gupta, 2014. "Dutch Disease Effect of Oil Rents on Agriculture Value Added in MENA Countries," Working Papers 201408, University of Pretoria, Department of Economics.
    20. Trent Saunders & Peter Tulip, 2019. "A Model of the Australian Housing Market," RBA Research Discussion Papers rdp2019-01, Reserve Bank of Australia.
    21. Judith Yates, 2011. "Housing in Australia in the 2000s: On the Agenda Too Late?," RBA Annual Conference Volume (Discontinued), in: Hugo Gerard & Jonathan Kearns (ed.),The Australian Economy in the 2000s, Reserve Bank of Australia.
    22. Frédérick Demers, 2005. "Modelling and Forecasting Housing Investment: The Case of Canada," Staff Working Papers 05-41, Bank of Canada.
    23. repec:rza:wpaper:375 is not listed on IDEAS
    24. Wadud, I.K.M. Mokhtarul & Bashar, Omar H.M.N. & Ahmed, Huson Joher Ali, 2012. "Monetary policy and the housing market in Australia," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 849-863.

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    • A1 - General Economics and Teaching - - General Economics

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