Working Paper: NBER ID: w18362
Authors: Hideaki Hirata; Ayhan Kose; Christopher Otrok; Marco E. Terrones
Abstract: We examine the properties of house price fluctuations across eighteen advanced economies over the past forty years. We ask two specific questions: First, how synchronized are housing cycles across these countries? Second, what are the main shocks driving movements in global house prices? To address these questions, we first estimate the global components in house prices and various macroeconomic and financial variables. We then evaluate the roles played by a variety of global shocks, including shocks to interest rates, monetary policy, productivity, credit, and uncertainty, in explaining house price fluctuations using a wide range of FAVAR models. We find that house prices are synchronized across countries, and the degree of synchronization has increased over time. Global interest rate shocks tend to have a significant negative effect on global house prices whereas global monetary policy shocks per se do not appear to have a sizeable impact. Interestingly, uncertainty shocks seem to be important in explaining fluctuations in global house prices.
Keywords: house prices; global synchronization; macroeconomic fluctuations
JEL Codes: E32; E43; E52; G15; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| global interest rate shocks (E43) | global house prices (R31) |
| uncertainty shocks (D89) | global house prices (R31) |
| productivity shocks (O49) | global house prices (R31) |
| global monetary policy shocks (E49) | global house prices (R31) |