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Real Estate Valuation, Current Account, and Credit Growth Patterns Before and After the 2008–2009 Crisis

Author

Listed:
  • Aizenman, Joshua

    (Asian Development Bank Institute)

  • Jinjarak, Yothin

    (Asian Development Bank Institute)

Abstract

This paper explores the stability of the key conditioning variables accounting for real estate valuation before and after the crisis of 2008–2009, in a panel of 36 countries, for the period of 2005:I–2012:IV, recognizing the incidence of global financial crisis. Our paper validates the robustness of the association between the real estate valuation of lagged current account patterns, both before and after the crisis. The results are supportive of both current account and credit growth channels, with the animal-spirits and momentum channels playing the most important role in the boom and bust of real estate valuation.

Suggested Citation

  • Aizenman, Joshua & Jinjarak, Yothin, 2013. "Real Estate Valuation, Current Account, and Credit Growth Patterns Before and After the 2008–2009 Crisis," ADBI Working Papers 429, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0429
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    File URL: http://www.adbi.org/files/2013.07.23.wp429.real.estate.valuation.after.2008.2009.crisis.pdf
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    References listed on IDEAS

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    1. Maurice Obstfeld, 2012. "Does the Current Account Still Matter?," American Economic Review, American Economic Association, vol. 102(3), pages 1-23, May.
    2. Forbes, Kristin J. & Warnock, Francis E., 2012. "Capital flow waves: Surges, stops, flight, and retrenchment," Journal of International Economics, Elsevier, vol. 88(2), pages 235-251.
    3. Klaus Adam & Pei Kuang & Albert Marcet, 2012. "House Price Booms and the Current Account," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 77-122.
    4. David Laibson & Johanna Mollerstrom, 2010. "Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis," Economic Journal, Royal Economic Society, vol. 120(544), pages 354-374, May.
    5. Christopher D. Carroll & Misuzu Otsuka & Jiri Slacalek, 2011. "How Large Are Housing and Financial Wealth Effects? A New Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(1), pages 55-79, February.
    6. Karl E. Case & Robert J. Shiller & Anne K. Thompson, 2012. "What Have They Been Thinking? Homebuyer Behavior in Hot and Cold Markets," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 265-315.
    7. Jack Favilukis & David Kohn & Sydney C. Ludvigson & Stijn Van Nieuwerburgh, 2012. "International Capital Flows and House Prices: Theory and Evidence," NBER Chapters,in: Housing and the Financial Crisis, pages 235-299 National Bureau of Economic Research, Inc.
    8. Edward L. Glaeser & Joshua D. Gottlieb & Joseph Gyourko, 2012. "Can Cheap Credit Explain the Housing Boom?," NBER Chapters,in: Housing and the Financial Crisis, pages 301-359 National Bureau of Economic Research, Inc.
    9. University of Chicago & Pedro Gete, 2009. "Housing Markets and Current Account Dynamics," 2009 Meeting Papers 427, Society for Economic Dynamics.
    10. Claudio Borio & Piti Disyatat, 2011. "Global imbalances and the financial crisis: Link or no link?," BIS Working Papers 346, Bank for International Settlements.
    11. Gete, Pedro, 2009. "Housing Markets and Current Account Dynamics," MPRA Paper 20957, University Library of Munich, Germany, revised 24 Feb 2010.
    12. Tomura, Hajime, 2010. "International capital flows and expectation-driven boom-bust cycles in the housing market," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 1993-2009, October.
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    Citations

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    Cited by:

    1. Robert Kollmann & Marco Ratto & Werner Roeger & Jan in't Veld & Lukas Vogel, 2015. "What drives the German current account? And how does it affect other EU Member States?," Economic Policy, CEPR;CES;MSH, vol. 30(81), pages 47-93.
    2. in 't Veld, Jan & Kollmann, Robert & Pataracchia, Beatrice & Ratto, Marco & Roeger, Werner, 2014. "International capital flows and the boom-bust cycle in Spain," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 314-335.
    3. Oliver Röhn & Aida Caldera Sánchez & Mikkel Hermansen & Morten Rasmussen, 2015. "Economic resilience: A new set of vulnerability indicators for OECD countries," OECD Economics Department Working Papers 1249, OECD Publishing.
    4. Matthew S. Yiu & Sahminan Sahminan, 2017. "Global Liquidity, Capital Inflows and House Prices in ASEAN Economies," International Real Estate Review, Asian Real Estate Society, vol. 20(1), pages 105-126.
    5. Mikkel Hermansen & Oliver Röhn, 2017. "Economic resilience: The usefulness of early warning indicators in OECD countries," OECD Journal: Economic Studies, OECD Publishing, vol. 2016(1), pages 9-35.
    6. Hwee Kwan Chow & Taojun Xie, 2016. "Are House Prices Driven by Capital Flows? Evidence from Singapore," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-21, February.

    More about this item

    Keywords

    current account; real estate; credit supply; global crisis; housing boom;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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