Housing and the Business Cycle

Jonathan Heathcote

Working Papers from Georgetown University, Department of Economics

Abstract: In the United States, the percentage standard deviation of residential investment is more than twice that of non-residential investment. GDP, consumption, and both types of investment all co-move positively. At the industry level, output and hours worked in construction are more than three times as volatile as in services, and output and hours co-move positively across sectors. We reproduce all these facts in a multi-sector growth model with the following characteristics: different final goods are produced using different proportions of the same set of intermediate inputs, construction is relatively labor intensive, residential investment is relatively construction intensive, and housing depreciates much more slowly than business capital. Previous empirical work exploring the determinants of residential investment is re-examined in light of the models equilibrium relationship between residential investment, house prices, and the rental rate on capital.

Keywords: Residential investment; House prices; Multi-sector models (search for similar items in EconPapers)
JEL-codes: E2 E3 R3 (search for similar items in EconPapers)
Date: 2003-09-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www8.georgetown.edu/departments/economics/pdf/321.pdf Full text (application/pdf)
None

Related works:
Journal Article: HOUSING AND THE BUSINESS CYCLE (2005)
Working Paper: Housing and the business cycle (2004)
Working Paper: Housing and the Business Cycle (2001)
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: https://EconPapers.repec.org/RePEc:geo:guwopa:gueconwpa~03-03-21

Ordering information: This working paper can be ordered from
Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
http://econ.georgetown.edu/

Access Statistics for this paper

More papers in Working Papers from Georgetown University, Department of Economics Georgetown University Department of Economics Washington, DC 20057-1036.
Bibliographic data for series maintained by Marcia Suss ( this e-mail address is bad, please contact ).