Economics at your fingertips  

Macroeconomic effects of a decline in housing prices in Sweden

Peter Gustafsson, Pär Stockhammar and Pär Österholm ()

Journal of Policy Modeling, 2016, vol. 38, issue 2, 242-255

Abstract: Real housing prices in Sweden have roughly doubled the last 15 years. The rise in housing prices has coincided with a rise in household debt, sparking debate about both the presence of financial imbalances in the Swedish economy and the macroeconomic effects that a correction of these imbalances would have. In this paper, we conduct a quantitative assessment of the macroeconomic effects of a considerable decline in housing prices using a Bayesian VAR model. Results show that a 20% drop in housing prices would lead to a recession-like impact on household consumption and unemployment. The impact would be even greater if falling housing prices coincided with a global economic downturn. This information should be useful to policymakers. If a fall in housing prices were to materialize, more expansionary stabilization policies would be motivated in order to dampen the effects on the real economy.

Keywords: Bayesian VAR; House prices; Private consumption; Unemployment; Small open economy (search for similar items in EconPapers)
JEL-codes: C32 F43 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Macroeconomic Effects of a Decline in Housing Prices in Sweden (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Policy Modeling is currently edited by A. M. Costa

More articles in Journal of Policy Modeling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-10-07
Handle: RePEc:eee:jpolmo:v:38:y:2016:i:2:p:242-255