Housing and the business cycle

Morris Davis () and Jonathan Heathcote ()

No 2004-11, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In the United States, the percentage standard deviation of residential investment is more than twice that of non-residential investment. In addition, GDP, consumption, and both types of investment co-move positively. We reproduce these facts in a calibrated multi-sector growth model where construction, manufacturing and services are combined, in different proportions, to produce consumption, business investment and residential structures. New housing requires land in addition to new structures. The model can also account for important features of industry-level data. In particular, hours and output in all industries are positively correlated, and are most volatile in construction.

Keywords: Housing - Finance; Investments; Business cycles (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
Date: 2004
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Related works:
Working Paper: Housing and the Business Cycle (2001)
Working Paper: Housing and the Business Cycle (2003)
Journal Article: HOUSING AND THE BUSINESS CYCLE (2005)
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