Current Account Patterns and National Real Estate Markets

Joshua Aizenman () and Yothin Jinjarak

No 13921, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the association between the current account and real estate valuation across countries, subject to data availability [43 countries, of which 25 are OECD], during 1990 - 2005. We find robust and strong positive association between current account deficits and the appreciation of the real estate prices/(GDP deflator). Controlling for lagged GDP/capita growth, inflation, financial depth, institution, urban population growth and the real interest rate; a one standard deviation increase of the lagged current account deficits is associated with a real appreciation of the real estate prices by 10%. This real appreciation is magnified by financial depth, and mitigated by the quality of institutions. Intriguingly, the economic importance of current account variations in accounting for the real estate valuation exceeds that of the other variables, including the real interest rate and inflation. Among the OECD countries, we find evidence of a decline overtime in the cross country variation of the real estate/(GDP deflator), consistent with the growing globalization of national real estate markets. Weaker patterns apply to the non-OECD countries in the aftermath of the East Asian crisis.

JEL-codes: F15 F21 F32 R21 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-opm and nep-ure
Date: 2008-04
Note: ITI IFM
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Journal Article: Current account patterns and national real estate markets (2009)
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