EconPapers    
Economics at your fingertips  
 

House Prices Booms and Current Account Deficits

Andrea Ferrero ()

No 1386, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: One of the most striking features of the period before the Great Recession of 2007-2009 is the strong positive correlation between house price appreciation and current account deficits in countries that have subsequently experienced the highest degree of financial turmoil. A progressive relaxation of credit constraints can rationalize this empirical observation. Lower collateral requirements facilitate access to external funding and drive up house prices. Households increase their leverage borrowing from the rest of the world so that the current account turns negative. Several pieces of evidence support this view. The paper further compares this mechanism with the role of monetary policy, the exchange rate regime and foreign saving shocks in accounting for the evidence.

Date: 2011
New Economics Papers: this item is included in nep-opm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
https://economicdynamics.org/meetpapers/2011/paper_1386.pdf (application/pdf)

Related works:
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:red:sed011:1386

Access Statistics for this paper

More papers in 2011 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2022-01-14
Handle: RePEc:red:sed011:1386