The impacts of fiscal policy shocks on the US housing market

Isabel Ruiz () and Carlos Vargas-Silva

Empirical Economics, 2016, vol. 50, issue 3, No 4, 777-800

Abstract: Abstract We explore empirically the impact of fiscal policy shocks on the US housing market using a vector autoregressive model. Identification is achieved through sign restrictions. Accounting for announcement effects, a revenue shock has a short-lived positive impact on house prices and indicators of housing activity. The impact of a spending shock on housing activity is negative and more persistent, but there is no substantial response from house prices. A balanced budget spending expansion (i.e. 1 % increases in spending and revenue) has a short-lived negative impact on housing activity and a very persistent negative impact on house prices. The paper presents results from other combinations of the two shocks. Results are generally robust to only using data for the post-financial liberalization period (i.e. since 1983).

Keywords: Housing; Fiscal policy; VAR (search for similar items in EconPapers)
JEL-codes: E62 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00181-015-0961-8

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