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House price fluctuations and the business cycle dynamics

Author

Listed:
  • Girum D. Abate

    (Aarhus University and CREATES)

  • Luc Anselin

    (Arizona State University)

Abstract

This paper investigates the impact of house price movements on output in a space-time dynamic framework. The transmission of house price fluctuations to the macroeconomy both across space and over time is explicitly considered through spatial econometric modeling techniques. Using 373 metropolitan areas in the US from 2001 to 2013, it is shown that house price fluctuations have detrimental effect on output growth and spillover from one location to another. The loss of output due to house price fluctuations is more pronounced during the recent financial crisis. The time varying recursive estimation of the space-time econometric model shows that the coefficient of spatial correlation has been increasing over time, reflecting an increasing trend in house price synchronization.

Suggested Citation

  • Girum D. Abate & Luc Anselin, 2016. "House price fluctuations and the business cycle dynamics," CREATES Research Papers 2016-06, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2016-06
    as

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    File URL: https://repec.econ.au.dk/repec/creates/rp/16/rp16_06.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    House price fluctuations; output growth; space-time modeling;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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