The Response of Housing Construction to a Copper Price Shock in Chile (2009–2020)

Byron Idrovo and Javier E. Contreras-Reyes
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Javier E. Contreras-Reyes: Instituto de Estadística, Facultad de Ciencias, Universidad de Valparaíso, Valparaíso 2360102, Chile

Economies, 2021, vol. 9, issue 3, 1-11

Abstract: The copper price is a leading indicator of real estate activity. Price increases are statistically related to increasing numbers of applications for residential building permits. However, this reciprocity is not instantaneous as permit numbers lag price rises by 9 to 10 months. This dynamic is implicit in various transmission channels: from the first effects on investment plans and demand for durable goods due to better expectations from investors and consumers to the real impact of higher copper revenues on the economy’s aggregate production and demand (multiplier or second-round effect). In this paper, we proposed the impulse-response functions of a vector autoregressive model to capture the dynamic between the copper price and house building permits. Therefore, it would be expected that the recent copper price increase will boost construction and real estate activity. The effects could materialize this year and extend into early 2022.

Keywords: copper price; housing construction; real estate; time series; VAR model (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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