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Is housing the business cycle? evidence from U.S. cities

  • Andra C. Ghent
  • Michael T. Owyang

We analyze the relationship between housing and the business cycle in a set of 51 U.S. cities. Most surprisingly, we find that declines in house prices are often not followed by declines in employment. We also find that national permits are a better leading indicator for a city’s employment than a city’s own permits.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2009-007.

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Date of creation: 2009
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Handle: RePEc:fip:fedlwp:2009-007
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  1. Gerald Carlino & Keith Sill, 2001. "Regional Income Fluctuations: Common Trends And Common Cycles," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 446-456, August.
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  3. James D. Hamilton & Michael T. Owyang, 2009. "The propagation of regional recessions," Working Papers 2009-013, Federal Reserve Bank of St. Louis.
  4. Del Negro, Marco & Otrok, Christopher, 2007. "99 Luftballons: Monetary policy and the house price boom across U.S. states," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1962-1985, October.
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  7. James D. Hamilton, 2008. "Daily Monetary Policy Shocks and the Delayed Response of New Home Sales," NBER Working Papers 14223, National Bureau of Economic Research, Inc.
  8. Edward L. Glaeser & Joseph Gyourko, 2006. "Housing Dynamics," NBER Working Papers 12787, National Bureau of Economic Research, Inc.
  9. Gordon, S.F. & Filardo, A.J., 1993. "Business Cycle Durations," Papers 9328, Laval - Recherche en Politique Economique.
  10. Kamhon Kan & Sunny Kai-Sun Kwong & Charles Ka-Yui Leung, 2003. "The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence," IEAS Working Paper : academic research 03-A004, Institute of Economics, Academia Sinica, Taipei, Taiwan.
  11. 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.
  12. Chib, Siddhartha & Greenberg, Edward, 1996. "Markov Chain Monte Carlo Simulation Methods in Econometrics," Econometric Theory, Cambridge University Press, vol. 12(03), pages 409-431, August.
  13. Michael T. Owyang & Jeremy M. Piger & Howard J. Wall & Christopher H. Wheeler, 2007. "The economic performance of cities: a Markov-switching approach," Working Papers 2006-056, Federal Reserve Bank of St. Louis.
  14. Jonathan Heathcote, 2003. "Housing and the Business Cycle," Working Papers gueconwpa~03-03-21, Georgetown University, Department of Economics.
  15. Aizenman, Joshua & Jinjarak, Yothin, 2008. "Current account patterns and national real estate markets," Santa Cruz Department of Economics, Working Paper Series qt1rh4s127, Department of Economics, UC Santa Cruz.
  16. Edward E. Leamer, 2007. "Housing IS the Business Cycle," NBER Working Papers 13428, National Bureau of Economic Research, Inc.
  17. Morris A. Davis, 2010. "housing and the business cycle," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  18. Mankiw, N. Gregory & Weil, David N., 1989. "The baby boom, the baby bust, and the housing market," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 235-258, May.
  19. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, September.
  20. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  21. Peter Temin, 1998. "Causes of American business cycles: an essay in economic historiography," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 37-64.
  22. Boivin, Jean & Giannoni, Marc P. & Mihov, Ilian, 2006. "Sticky prices and monetary policy: Evidence from disaggregated US data," CFS Working Paper Series 2007/14, Center for Financial Studies (CFS).
  23. Peter Temin, 1998. "The Causes of American Business Cycles: An Essay in Economic Historiography," NBER Working Papers 6692, National Bureau of Economic Research, Inc.
  24. Corbae, D. & Ouliaris, S. & Phillips, P.C.B., 1997. "Band Spectral Regression with Trending Data," Working Papers 97-09, University of Iowa, Department of Economics.
  25. Theodore M. Crone, 2005. "An Alternative Definition of Economic Regions in the United States Based on Similarities in State Business Cycles," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 617-626, November.
  26. Hamilton, James D., 2008. "Daily monetary policy shocks and new home sales," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1171-1190, October.
  27. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
  28. Fratantoni, Michael & Schuh, Scott, 2003. " Monetary Policy, Housing, and Heterogeneous Regional Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 557-89, August.
  29. James M. Poterba, 1991. "House Price Dynamics: The Role of Tax Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 143-204.
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