Housing Dynamics over the Business Cycle

Finn Kydland, Peter Rupert () and Roman Sustek

No 1423, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: Housing construction, measured by housing starts, leads GDP in a number of countries. Measured as residential investment, the lead is observed only in the US and Canada; elsewhere, residential investment is coincident. Variants of existing theory, however, predict housing construction lagging GDP. In all countries in the sample, nominal interest rates are low ahead of GDP peaks. Introducing fully-amortizing mortgages and an estimated process for nominal interest rates into a standard model aligns the theory with the observations on starts; one-period loans are insufficient to generate the lead. Longer time to build then makes residential investment cyclically coincident.

Keywords: Residential Investment; Housing Starts; Business Cycle; Mortgage Costs; Time to Build (search for similar items in EconPapers)
JEL-codes: E22 E32 R21 R31 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2014-08
New Economics Papers: this item is included in nep-ban, nep-dge, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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http://www.centreformacroeconomics.ac.uk/Discussio ... MDP2014-23-Paper.pdf First version, 2014 (application/pdf)

Related works:
Working Paper: Housing dynamics over the business cycle (2014)
Working Paper: Housing Dynamics over the Business Cycle (2012)
Working Paper: Housing Dynamics over the Business Cycle (2012)
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