Working Paper: NBER ID: w22699
Authors: Joshua Aizenman; Yothin Jinjarak; Huanhuan Zheng
Abstract: This paper evaluates the relation between house prices and economic growth. Using a dataset that covers house prices for 19 countries from the first quarter of 1975 to the third quarter of 2013. We find that house price appreciations are positively associated with economic growth, while the relation between house price depreciations and economic growth is highly non-linear, depending on country-specific characteristics. In the absence of concurrent banking crisis, large house price depreciations (rather than prolonged and modest ones) are positively associated with economic growth. We also find that the positive association between house price depreciations and economic growth is more pronounced in countries with civil-law legal systems, in countries without mortgage insurance or personal bankruptcy law.
Keywords: house prices; economic growth; international evidence; nonlinear relationship; civil law systems; mortgage insurance
JEL Codes: F41; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| House Price Appreciations (R31) | Economic Growth (O49) |
| Large House Price Depreciations (R31) | Economic Growth (O49) |
| House Price Depreciations (R31) | Economic Growth (O49) |
| Economic Growth (O49) | House Prices (R31) |
| Country-specific Characteristics (O57) | Economic Growth (O49) |