 The Impact of Fiscal Policy on Housing in the U.SWilliam Miles
Journal of Economic Insight, 2024, vol. 50, issue 2, 21-60 Abstract: Theory and empirical evidence have provided contradictory predictions and findings on the impact of government spending on housing investment and home values. Previous empirical studies have employed vector-autoregressions. Given the deficiencies of VARs, we utilize local linear projections. In addition, we directly compare the impact of government spending on both housing investment (residential investment, permits, sales, housing starts) and non-residential investment. We find fiscal expansion leads to unambiguously greater crowding out of housing activity than for non-housing investment. Moreover, housing is more sensitive to monetary policy than non-residential investment. Thus, housing appears more sensitive to policy shocks than non-housing capital spending. In contrast to housing investment, home prices, while reacting negatively to government spending shocks, don’t exhibit the magnitude of the reaction of housing, or even non-housing investment. This likely reflects the sticky nature of house prices, with falling purchases leading to greater “time on market†more than falling prices. JEL-codes: E00 E62 R31 (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mve:journl:v:50:y:2024:i:2:p:21-60 Access Statistics for this article Journal of Economic Insight is currently edited by Christopher Douglas and Joshua Lewer More articles in Journal of Economic Insight from Missouri Valley Economic Association Contact information at EDIRC. |
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