الگوهای حساب جاری و بازار ملی املاک و مستغلات

This paper studies the association between current account and real estate valuation across countries. We find a robust and strong positive association between current account deficits and the appreciation of the real estate prices/(GDP deflator). Controlling for lagged GDP/capita growth, inflation, financial depth, institution, urban population growth and the real interest rate; a one standard deviation increase of the lagged current account deficits is associated with an appreciation of the real estate prices by 10%. This real appreciation is magnified by financial depth, and mitigated by the quality of institutions. Intriguingly, the economic importance of current account variations in accounting for the real estate valuation exceeds that of the other variables, including the real interest rate and inflation. Among the OECD countries, we find evidence of a decline over time in the cross country variation of the real estate/(GDP deflator), consistent with the growing globalization of national real estate markets. Weaker patterns apply to the non-OECD countries in the aftermath of the East Asian crisis.

The financial liberalization wave in emerging markets during the 1990s has frequently led to boom–bust cycles, particularly when the initial boom been followed by a financial crisis. A significant literature has focused on the dynamics of financial liberalization in emerging markets, where financial liberalization has led to large inflows of capital, which bankroll growing current account deficits and magnifying economic booms. Frequently, these booms were manifested in sizable real estate and real exchange rate appreciations, and in the buildup of balance sheet vulnerabilities, leading ultimately to financial crises. Observers noted that the real estate market played a key role in the propagation of the boom and bust cycle, magnifying the welfare costs of preexisting distortions (like moral hazard).1 The literature concerned with boom–bust cycles induced by financial inflows dealt mostly with East Asia and Latin America, implicitly presuming that the US and Europe are less exposed to the vulnerabilities that come with such cycles. The ability of OECD countries to borrow in their currency, the greater reliance on flexible exchange rate regimes, and the presumption of better institutions suggests that the potential volatility induced by real estate boom/bust cycles is indeed larger in developing countries. Yet, there is little evidence regarding the degree to which countries share similar qualitative links between current account patterns and national real estate markets. The purpose of our paper is to provide evidence on the robustness of the current account/real estate channel across availability wide spectrum of countries. Our main finding is that, indeed, this channel is potent across all countries, subject to interactions with other domestic variables. Another recent literature has focused on the volatility of real estate prices relative to the observable changes in fundamentals. These studies frequently used the variation in the experience of municipalities in the USA, studying the factors accounting for the incidence of boom–bust cycles over time. Glaeser et al. (2008) pointed out the role of the supply side in accounting for recent boom–bust cycles. Other studies focused on the impact of the nature of financing [see the papers in the September 2008 JUE symposium on Mortgages and the Housing Crash]. An issue deserving further investigation is the degree to which international factors affect the patterns of the boom–bust cycles across countries and time. For example, the US, the UK, Spain and Ireland have shared similar trends in recent years – all running sizable current account deficits and experiencing prolonged spells of real estate appreciation. These patterns are consistent with the notion that international factors, including financial integration and financial flows, are among the factors accounting for the real estate boom–bust cycles in the OECD. We examine these assertions, assessing the impact of the cross country variation in current account patterns on the real estate valuation. In this paper, we take the view that current real estate valuation has a sizable dependence on lagged macroeconomic variables. This is consistent with the notion that adjustment to changing macro conditions is more protracted in real estate markets than in stock markets [see Glaeser and Gyourkos, 2007 and Case and Shillers, 1989].2 We provide evidence consistent with the view that the price adjustment of equities (assets traded in well organized liquid markets, subject to low trading costs) is faster than that of real estate (less liquid assets, subject to high trading costs). We analyze regressions that account for the real appreciation of the housing stock, controlling for lagged variables, including GDP per capita, real interest rate, inflation, and the current account. We find that lagged current account patterns are important in accounting for the real appreciation of the real estate market. In addition, the current account changes interacting with other macro variables are important in accounting for future real valuation of housing. Specifically, a one standard deviation increase of the lagged current account deficits [by 4% in our sample] is associated with real appreciation of real estate prices by about 10%. This real appreciation is magnified by financial depth [about 2%], and mitigated by the quality of institutions [about 3%]. Intriguingly, the economic importance of current account variations in accounting for the real appreciation of real estate prices exceeds that of the other variables. This includes the real interest rate – a one standard deviation drop of the lagged real interest rate [by 2.5% in our sample] is associated with real appreciation of real estate prices by about 7%. Among the OECD we find evidence of decline over time in the cross country variation of the relative real estate prices, consistent with the deeper globalization of national real estate markets. Weaker patterns apply to the non-OECD countries in the aftermath of the East Asian crisis. Finally, we subject our analysis to various robustness checks. Sections 2 and 3 review the methodology and the data, respectively. The estimation and results are summarized in Section 4. Section 5 offers concluding remarks.

Our results are consistent with the notion that for all countries, current account deficits are associated with sizable real appreciation of the real estate. This effect holds controlling for the real interest rate, GDP growth, inflation, other conditioning variables, and extensive robustness checks.33 We also find evidence consistent with growing globalization of national real estate markets. These findings are consistent with various scenarios explaining patterns of capital flows across countries, including differential productivity trends and varying saving patterns. In the absence of pre-existing distortions, financial inflows are unambiguously welfare improving. Yet, in a second-best environment, public finance considerations imply that inflows of capital may magnify distorted activities, thereby increasing the ultimate costs of these distortions. Arguably, the experience of emerging markets in the aftermath of financial liberalizations during the 1990s illustrated these concerns. Needless to say, this second-best assertion is not an argument against financial integration, but a cautionary tale – greater financial globalization implies the need to be more assertive in dealing with moral hazard and other pre-existing domestic distortions.