Permanent and Transitory Dynamics in House Prices and Consumption: Some Implications for the Real Effects of the Financial Crisis

Posted: 29 Apr 2009 Last revised: 9 Jun 2013

See all articles by Fabio C. Bagliano

Fabio C. Bagliano

University of Turin - Department of Economics and Statistics; Center for Research on Pensions and Welfare Policies (CeRP); University of Turin - Collegio Carlo Alberto

Claudio Morana

Università di Milano Bicocca; Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES); Center for Economic Research on Pensions and Welfare Policies (CeRP); Rimini Center for Economic Analysis - Europe ETS; Rimini Center for Economic Analysis - HQ

Date Written: April 29, 2009

Abstract

In this paper a small-scale macroeconomic system is estimated in the framework of a common trends model, in order to explore the dynamic interactions between real house prices, consumption expenditure and output in the US and major European economies. The results point to important differences across countries, with long-run house price effects on consumption only for France, Germany and the US. However, interactions between house prices and consumption are detected in all countries at shorter horizons, with important implications of the current unwinding of the sub-prime crisis for real activity. Evidence of international comovements in the common trend component of house price dynamics is also found.

Keywords: house prices, business cycle, sub-prime crisis

JEL Classification: C22, E32, F36

Suggested Citation

Bagliano, Fabio C. and Morana, Claudio, Permanent and Transitory Dynamics in House Prices and Consumption: Some Implications for the Real Effects of the Financial Crisis (April 29, 2009). Applied Financial Economics, Vol. 20, pp. 151-170, 2010, Available at SSRN: https://ssrn.com/abstract=1396586

Fabio C. Bagliano

University of Turin - Department of Economics and Statistics ( email )

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HOME PAGE: http://web.econ.unito.it/bagliano

Center for Research on Pensions and Welfare Policies (CeRP) ( email )

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University of Turin - Collegio Carlo Alberto ( email )

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Claudio Morana (Contact Author)

Università di Milano Bicocca ( email )

Dip Economia Metodi Quantitativi Strategie Impresa
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Università degli Studi di Milano-Bicocca - Center for European Studies (CefES) ( email )

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Center for Economic Research on Pensions and Welfare Policies (CeRP) ( email )

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Italy

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