House prices and sectoral output: A cross-country analysis

Berrak Bahadir, Inci Gumus and Zeren Tatar Taspinar

Economics Letters, 2025, vol. 248, issue C

Abstract: This paper empirically analyzes the medium-run impact of house price fluctuations on sectoral output dynamics. Using an unbalanced panel of 47 countries, we find that house price expansions negatively affect the tradable sector, with no significant impact on the nontradable sector. Our results further show that house price expansions lead to real exchange rate appreciation, which raises domestic costs and diminishes the country’s competitiveness in international markets. We also study the importance of exchange rate flexibility for the link between house prices and sectoral output and show that the negative impact on the tradable sector is less pronounced in countries with more flexible exchange rate regimes, highlighting the importance of the real exchange rate’s response to house price changes.

Keywords: House prices; Tradable sector; Nontradable sector; Real exchange rate (search for similar items in EconPapers)
JEL-codes: E32 F31 R21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000758

DOI: 10.1016/j.econlet.2025.112238

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