چرخه مسکن و نوسانات اقتصاد کلان: یک دیدگاه جهانی

This paper investigates the international spillovers of housing demand shocks on real economic activity. The global economy is modeled using a Global VAR, with a novel house price data set for both advanced and emerging economies. The impulse responses to an identified U.S. housing demand shock confirm the existence of strong international spillovers to advanced economies. In contrast, the response of some major emerging economies is not significantly different from zero. Moreover, the analysis of synchronized housing demand shocks speaks in favor of the recent evidence of increased resilience of emerging economies to shocks originating in advanced economies; and it also suggests that a close monitoring of housing cycles in advanced economies as well as in emerging economies should be of interest for policy-makers.

The recent global financial crisis and ensuing recession led many to look at the housing market as a possible source of macroeconomic fluctuations. Moreover, the sluggish pace of the recovery among industrialized countries highlighted the crucial role played by emerging market economies as a source of world growth. Many theoretical models stress the important linkage between the price of assets, such as stocks or house prices, and real economic activity (among many others, see Bernanke et al., 1999, Iacoviello, 2005 and Iacoviello and Neri, 2010). Also, many empirical studies show that house prices are subject to frequent boom- and -bust cycles and that housing busts can be very costly in terms of output loss (e.g., Bordo and Jeanne, 2002). Moreover, the surprisingly high synchronization of the housing downturn, as observed during the global financial, is likely to have exacerbated such episodes (e.g., Claessens et al., 2010). The similarity of the house price pattern within the major advanced economies during the last two decades raised a number of questions concerning the existence of common international factors affecting house prices. While much of the debate has focused on advanced economies, it is surprising that housing markets in emerging market economies and their links to the broader economy have not been systematically researched yet. Fig. 1(a) displays the behavior of a global house price index and three group-specific indices, for advanced economies, emerging Asia (excluding China), and eastern Europe, respectively. Both the global and the group-specific indices clearly show the pronounced boom- and -bust cycle of the last decade. However, the group-specific indices also display significant differences. While comoving closely from the beginning of the 2000s, house prices in each group display distinctive features during the whole 1990s. Fig. 1(b) compares the global house price index with the country-specific indices for the U.S. and China. House prices in the U.S. are in free fall since the fourth quarter of 2006, excluding an up-tick in early 2009 (most likely propelled by the U.S. first-time home buyer credit provision of the American Recovery and Reinvestment Act of 2009). In contrast, house prices in China dropped for only two quarters, namely 2008:2 and 2008:3, and then started growing again. Full-size image (63 K) Fig. 1. Real House Price Indices. Figure options Motivated by this evidence, many interesting questions arise. Are international house prices really correlated across countries? Is there a common factor driving a global housing cycle? How are house price shocks transmitted to the real economy? Across these questions, which is the difference, if any, between advanced economies (AEs) and emerging economies (EMEs)? This paper takes a global perspective and aims to provide an assessment of the linkages between the macroeconomy and the housing market, as well as to investigate the effects of housing demand shocks onto real economic activity. Exploiting a novel multi-country data set of real and financial variables, a Global Vector AutoRegression (GVAR) model, originally proposed by Pesaran et al. (2004), is used to investigate the international transmission of housing shocks. Specifically, three types of shocks are identified and investigated: i) housing demand shocks originating in the U.S.; ii) housing demand shocks simultaneously originating in all AEs; and iii) housing demand shocks simultaneously originating in all EMEs. This paper aims to contribute to the existing literature along two dimensions. The main contribution lies in the investigation of the transmission of housing demand shocks with a global perspective, an issue whose scarce assessment is due to the technical challenges involved in dealing with high-dimension multi-country models and to the lack of a comprehensive house prices data set for EMEs. Secondly, this paper offers a methodological contribution to the GVAR literature by providing a methodology to identify country-specific and synchronized housing demand shocks. With few exceptions, the GVAR literature has so far relied on generalized impulse response functions to non-identified disturbances for the dynamic analysis of the transmission of shocks. I will demonstrate that, while this modeling choice can be justified for a class of applications, a meaningful analysis of the transmission of financial shocks requires a structural economic interpretation of the shocks under investigation. The paper puts forth two sets of results, one stemming from the descriptive analysis of the novel house price data set and another from the structural GVAR analysis, respectively. Empirical evidence – based on simple dynamic correlations and principal component analysis – shows that real international house price returns can be highly correlated across countries and that such correlation varies significantly over time. The documented synchronization, moreover, is larger when considering AEs and EMEs separately. Against this background, a GVAR model is estimated with data on 33 major AEs and EMEs covering more than 90 percent of world GDP. The data set is quarterly, from 1983:1 to 2009:4, thus including both the 2008–09 global recession and the first few quarters of the global recovery. In addition to house prices, the data set includes a set of macroeconomic and financial variables, namely real GDP, consumer price inflation, equity prices, exchange rates, short-term and long-term interest rates, and the price of oil. The results of the GVAR analysis are threefold. First, and consistently with the literature, U.S. housing demand shocks are quickly transmitted to the domestic economy, leading a short-term expansion of real GDP and consumer prices. Second, shocks originating in the U.S. housing market are also quickly transmitted to the global economy, even though the transmission is different across groups. While almost all AEs are affected by a U.S. housing demand shock in a significant fashion, EMEs response is heterogeneous. In particular, the effect of a U.S. housing demand shock on the real GDP of four large EMEs (namely China, India, Brazil, and Turkey) is not significantly different from zero. Third, and finally, a synchronized housing demand shock originating in AEs positively affects AEs and EMEs GDP with an estimated elasticity of similar magnitude; and a synchronized housing demand shock originating in EMEs leads to a sharp increase in EMEs GDP, generating a pronounced regional cycle. An interpretative key for these results is provided by recent evidence on the increasing resilience of EMEs to shocks originating in AEs and the emergence of “regional” business cycles (briefly surveyed below), which most likely played an important role in the unfolding of the recent global financial crisis and, most importantly, in the recovery. The findings of this paper, therefore, suggest that a close monitoring of housing cycles not only in AEs but also in EMEs should be of interest for policy-makers.

Exploiting a novel multi-country house price data set, this paper investigates the international transmission of housing demand shocks and their spillover effects on real economic activity in both advanced and emerging economies. Empirical evidence, based on unconditional dynamic correlations and principal component analysis, shows that real house price returns can be highly correlated across countries: such synchronization varies significantly over time and can be particularly high during the bust part of the cycle. The documented synchronization, however, is larger when considering advanced and emerging economies separately, suggesting the existence of group-specific (alias regional) common factors. A GVAR model is estimated with data for 33 major advanced and emerging economies, covering more than 90 percent of world GDP. The focus of the analysis is on three different shocks, namely a country-specific housing demand shock in the U.S., and a synchronized housing demand shock simultaneously originating in all advanced economies and emerging economies, respectively. The results of the GVAR analysis are threefold. First, and consistently with the literature, U.S. housing demand shocks are quickly transmitted to the domestic real economy, leading a short-term expansion of real GDP and consumer prices. Second, shocks originating in the U.S. housing market are also quickly transmitted to the global economy, even though the transmission is different across groups. While many advanced economies are affected by a U.S. housing demand shock in a significant fashion, emerging market economies response is heterogeneous. In particular, the effect of a U.S. housing demand shock on the real GDP of four large emerging economies (namely China, India, Brazil, and Turkey) is not significantly different from zero. Third, and finally, a synchronized housing demand shock originating in advanced economies positively affects advanced economies and emerging economies GDP with an estimated elasticity of similar magnitude; and a synchronized housing demand shock originating in emerging economies leads to a sharp increase in emerging economies GDP, generating a pronounced regional cycle. The results presented in this paper link with recent evidence on the increasing resilience of emerging economies to shocks originating in advanced economies, which is likely to have played an important role in the unfolding of the recent global financial crisis and, most importantly, in the recovery. These findings have also important policy implications, in particular regarding the current policy debate on the need for and the design of macro-prudential approaches. Given the deep economic impact that shocks to the housing sector can have on the real economy, the results of this paper suggest that a close monitoring of housing cycles should be of interest for policy-makers. Moreover, given the increasing importance of emerging economies and the emergence of regional business cycles, it will be important to consider the global nature of housing cycles.