IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Housing Markets and Current Account Dynamics

Listed author(s):
  • University of Chicago
  • Pedro Gete

I model global imbalances as arising from changes in preferences for housing relative to tradable goods. The key ingredients in the model are labor reallocation across sectors and consumption smoothing between housing and tradable goods. Countries import goods during periods when more domestic labor is devoted to housing construction. Housing booms are larger in countries that can run trade deficits. This occurs despite the absence of wealth effects, and even if trade is not primarily concentrated in capital goods. I provide several types of evidence to support the theory. First, over the last decade housing variables have decoupled from the business cycle while durable and total consumption expenditures have not. Second, for the same period there has been a strong cross-country correlation between housing variables and current account dynamics. Third, in a parameterized version of the model, housing demand shocks that match the cross-country dynamics of housing quantities generate current account dynamics matching recent global imbalances. Fourth, I use sign restrictions implied by the model to estimate a vector autoregression and identify the effects of housing shocks on the U.S. trade deficit. The results suggest that housing shocks are an important driving force of current account dynamics.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 427.

in new window

Date of creation: 2009
Handle: RePEc:red:sed009:427
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed009:427. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.