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The impact of disaggregated oil shocks on state-level real housing returns of the United States: The role of oil dependence

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  • Gupta, Rangan
  • Sheng, Xin
  • van Eyden, Reneé
  • Wohar, Mark E.

Abstract

We analyse the impact of oil supply, global economic activity, oil-specific consumption demand and oil inventory demand shocks on state-level real housing returns of the United States (US) over the monthly period of 1975:02 to 2019:12. We find that positive economic activity shocks and oil production shocks (associated with increase and decrease in oil prices respectively) increase real housing returns. At the same time, oil-specific consumption and inventory demand shocks raise oil prices and reduce the state-level real housing returns. Moreover, across the shocks, the strongest effect originates from the global demand shock. In addition, the degree of oil dependency (oil consumed minus oil produced as a ratio of oil consumed) does not change the nature of the impact of the four oil shocks on real housing returns drastically, but the size of the effects is relatively muted under low-oil dependence, barring the case of the oil inventory demand shock. Our results have important policy implications.

Suggested Citation

  • Gupta, Rangan & Sheng, Xin & van Eyden, Reneé & Wohar, Mark E., 2021. "The impact of disaggregated oil shocks on state-level real housing returns of the United States: The role of oil dependence," Finance Research Letters, Elsevier, vol. 43(C).
    • Handle: RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321001100
    DOI: 10.1016/j.frl.2021.102029
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    Cited by:

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    2. Hanif, Waqas & Andraz, Jorge Miguel & Gubareva, Mariya & Teplova, Tamara, 2024. "Are REITS hedge or safe haven against oil price fall?," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1-16.
    3. Çepni, Oğuzhan & Gupta, Rangan & Pienaar, Daniel & Pierdzioch, Christian, 2022. "Forecasting the realized variance of oil-price returns using machine learning: Is there a role for U.S. state-level uncertainty?," Energy Economics, Elsevier, vol. 114(C).
    4. Stenvall, David & Hedström, Axel & Yoshino, Naoyuki & Uddin, Gazi Salah & Taghizadeh-Hesary, Farhad, 2022. "Nonlinear tail dependence between the housing and energy markets," Energy Economics, Elsevier, vol. 106(C).

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    More about this item

    Keywords

    Oil shocks; State-level real housing returns; Oil dependency; Local projection model; Impulse response functions;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • 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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