Housing Demand Shocks and Households Balance Sheets
Marc Anderes ()
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Marc Anderes: ETH Zurich, Switzerland
No 21-492, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich
We examine the dynamic effects of housing demand shocks on a large set of U.S. macroeconomic series and detailed household balance sheet components for four wealth percentile groups. The results show that a positive housing shock translates into a large and persistent boom of economic activity, an expansion of credit and an increase of interest rates. While households of all wealth percentile groups make heavy use of home equity-based borrowing, we find a larger consumer spending sensitivity for weaker balance sheet households. This is supported by the elasticities of consumption with respect to house prices implied by our structural dynamic factor model. A historical decomposition suggests that housing demand shocks have largely contributed to the pronounced drop in poorer householdsâ€™ consumption during the Great Recession. Variance decompositions indicate that the identified housing shock has high explanatory power for key economic indicators, housing indices and household balance sheet series.
Keywords: : Housing demand shocks; Household balance sheets; Bayesian dynamic factor model (search for similar items in EconPapers)
JEL-codes: D31 E21 E32 E44 R31 (search for similar items in EconPapers)
Pages: 94 pages
New Economics Papers: this item is included in nep-mac, nep-ore and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:21-492
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