House Prices and Business Cycles in Europe: a VAR Analysis

Matteo Iacoviello ()

No 540, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: A structural vector autoregressive approach identifies the main macroeconomic factors behind fluctuations in house prices in France, Germany, Italy, Spain, Sweden and the UK. Quarterly GDP, house prices, money, inflation and interest rates are characterised by a multivariate process driven by supply, nominal, monetary, inflationary and demand shocks. Tight money leads to a fall in real house prices; house price responses are hump-shaped; the responses of house prices and, to a lesser extent, GDP to a monetary shock can be partly justified by the different housing and financial market institutions across countries; transitory shocks drive a significant part of short-run house price fluctuations.

Keywords: house prices; structural VAR; monetary policy (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 R21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-ure
Date: 2002-10-03
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