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Housing dynamics over the business cycle

Kydland, Finn E., Rupert, Peter and Šustek, Roman (2014) Housing dynamics over the business cycle. CFM discussion paper series (CFM-DP2014-23). Centre For Macroeconomics, London, UK.

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Housing construction, measured by housing starts, leads GDP in a number of countries. Measured as residential investment, the lead is observed only in the US and Canada; elsewhere, residential investment is coincident. Variants of existing theory, however, predict housing construction lagging GDP. In all countries in the sample, nominal interest rates are low ahead of GDP peaks. Introducing fully-amortizing mortgages and an estimated process for nominal interest rates into a standard model aligns the theory with the observations on starts; one-period loans are insufficient to generate the lead. Longer time to build then makes residential investment cyclically coincident

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2014 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment (including Inventories); Capacity
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Sets: Research centres and groups > Centre for Macroeconomics
Date Deposited: 15 Dec 2017 08:51
Last Modified: 22 Jan 2021 00:34

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