IDEAS home Printed from https://ideas.repec.org/p/inh/wpaper/2020-2.html
   My bibliography  Save this paper

Housing Cycle and Firm Investment: International Firm-level Evidence

Author

Listed:
  • Hyunduk Suh

    (Inha University)

  • Jin Young Yang

    (Zayed University)

Abstract

We analyze international firm-level data to examine the relationship between housing cycle and firm capital expenditure or R&D spending. We use the housing price component independent of firms’ investment opportunity and credit supply shocks, obtained by historical decomposition of a structural VAR, as the key explanatory variable. The baseline results support the existence of the collateral channel as housing price growth and firm investment exhibit a positive relationship. This collateral channel is more distinct for capital expenditure than R&D spending, and in housing market downturns than booms. Another notable finding is that despite the collateral channel, large housing price booms are detrimental to investment, which suggests a possible reallocation of resources from the production sector to the housing sector during those phases. Moreover, various firm-specific and country-specific characteristics are found to affect the housing price-investment relationship. Small firms and firms with stronger investment opportunities respond more sensitively to housing price shocks. Countries that rely more on bank financing, collateralized lending, and with higher LTV restraint, display a larger collateral effect in capital expenditure.

Suggested Citation

  • Hyunduk Suh & Jin Young Yang, 2020. "Housing Cycle and Firm Investment: International Firm-level Evidence," Inha University IBER Working Paper Series 2020-2, Inha University, Institute of Business and Economic Research.
    • Handle: RePEc:inh:wpaper:2020-2
    as

    Download full text from publisher

    File URL: https://drive.google.com/file/d/1TmgQ62g9z__AwwNcSaJjPDL52OIcOsGN/view?usp=sharing
    File Function: First version, 2020
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roddy Allan & Ervi Liusman & Teddy Lu & Desmond Tsang, 2021. "The COVID-19 Pandemic and Commercial Property Rent Dynamics," JRFM, MDPI, vol. 14(8), pages 1-24, August.

    More about this item

    Keywords

    Housing cycle; Investment; R&D; Housing price; Collateral channel;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inh:wpaper:2020-2. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Youngjin Yun (email available below). General contact details of provider: https://edirc.repec.org/data/deinhkr.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.