بازار املاک و مستغلات و اقتصاد کلان: یک چارچوب ارتباطی پویا

This paper analyzes the dynamic interactions between real estate markets, in the US and the UK and their macroeconomic environments. We apply a new approach based on a dynamic coherence function (DCF) to study these interactions bringing together different real estate markets (the securitized market, the commercial market and the residential market). The results suggest that there is a common trend that drives the different real estate markets in the UK and the US, particularly in the long run, since they have a similar shape of the DCF. We also find that, in the US, wealth and housing expenditure channels are very conductive during real estate crises. However, in the UK, only the wealth effect is significant as a transmission channel during real estate market downturns. In addition, real estate markets in the UK and the US react differently to institutional shocks. This brings some insights on the conduct of monetary policy in order to avoid disturbances in real estate markets.

The recent global economic downturn, attributed to the subprime crisis in the US with rapid worldwide contagion particularly in the housing sector, has attracted the attention of academics, policy makers, and economic agents at large. The magnitude of economic instability caused by the real estate sector highlighted the need to study the relationship between real estate and monetary policy to identify shocks that drive recessions. This issue is one of major concerns for central banks especially due to the role of housing as collateral. Since the 1990s, central banks have succeeded in their objective of price stability by means of inflation targeting policy but they failed to prevent asset prices bubbles and having negative real effects. Therefore, the recent emergence of boom-bust cycles in house prices, which was followed by a significant contraction in the real economy is very concerning to policy makers (Iacoviello and Neri, 2010 and Reinhart and Rogoff, 2008). One of the most important characteristics of asset prices is their quick reaction to news. According to Rigobon and Sack (2004) and Bernanke and Kuttner (2005), asset prices react quickly to monetary policy announcements. They are not only considered as a source of disturbance but also as a shock transmission channel (Mishkin, 2007). It is, thus crucial for central banks to analyze thoroughly the effects of monetary policy on asset prices in general, and on real estate in particular. However, the existing literature has focused mainly on the housing sector and its concomitant interaction with the economy (Ahearne et al., 2005, Bjørnland and Jacobsen, 2010, Iacoviello, 2005, Iacoviello and Neri, 2010 and Vargas-Silva, 2008). The main reason is that houses are commonly used as collateral for loans, so that a large portion of financial assets could be affected by housing values. In contrast, this paper provides an analysis of different real estate sectors and their linkages within the macroeconomic environment. This study analyzes interactions between real estate markets in the UK and the US and their relative macroeconomic environments. Our analysis differs from previous studies in two ways. Firstly, we compare a small and a large economy that have different practices in the real estate markets1 in order to see the degree of the convergence or divergence these two countries have with their economies. Secondly, this study brings together different real estate markets, the securitized market, the commercial market and the residential market. We do this because real estate indices are constructed differently. Thus, the sensitivity to macroeconomic factors might vary across the different real estate markets. Therefore, we can have a better understanding of transmission mechanisms between real estate markets and the macroeconomic environment and take the relevant actions when shocks hit one of the markets. Moreover, this paper contains some empirical contributions. We use a dynamic coherence function (DCF), developed by Ftiti (2010). It is based on the theory of evolutionary co-spectral analysis proposed by Priestley and Tong (1973). This is the first time that this methodology is used in the literature to measure the degree of interaction (co-movement) between real estate markets and macroeconomic variables. The DCF approach has many advantages. Firstly, it takes into account the dynamic dependence between time series. Secondly, this measure is useful for non-stationary series. Thus, we do not need any prior treatment of stationarity for the data. So, it allows us not to lose any information related to the real estate data that require already some processing of smoothing, appraisal and aggregation. The rest of the paper is organized as follows. Section 2 reviews the related literature on the linkages between real estate markets and macroeconomy. Section 3 explains the methodology and presents the data used in the study. Section 4 provides the empirical results. Finally, Section 5 concludes.

Due to the lack of consensus in the literature regarding the linkage between direct and indirect real estate markets and the macroeconomy, this paper further investigates the dynamic interaction between the direct and indirect real estate markets in the UK and the US and their relative macroeconomic environments. It contributes to the literature by evaluating the long and short run relationships between two of the largest and most developed direct and indirect real estate markets and the macroeconomy. The following conclusions can be drawn from the present study. First, a comparison of the real estate markets' co-movements with the macroeconomic variables in the UK and the US reveals a degree of synchronization of the UK and the US in their linkages with their macroeconomic environment. In fact, there is some synchronization between the UK and the US real estate markets in their long run co-movements with the long term interest rate, inflation and employment growth. Besides, the higher levels of the DCF of the employment growth in the long run comparing to the short run in both the UK and the US, determines the horizon of the adjustment between the supply and the demand in the real estate markets. On the other hand, there is some desynchronization between the two countries in the long and short run coherence functions of their real estate markets and economic growth, the money supply and the short term interest rate. The divergence that exists is more significant in the short run and more pronounced in the securitized market since it is the most volatile market and its volatility is higher in the short run. However, the global trend of the different indices converges in the long run even if their construction methodology is different. As a result, we conclude that there is a common trend that drives all the real estate markets, particularly in the long run, since they have similar shape of the DCF. Nevertheless, the returns of the different real estate markets are still different. Moreover, our results allow us to draw a clearer picture of the transmission mechanisms between real estate markets and monetary policy in the UK and the US during crises. We conclude that in the US, wealth and housing expenditure channels are very conductive during real estate crises. However, for the UK only the wealth effect is significant as a transmission channel during real estate market downturns. In fact, real estate prices are considered as one of the channels of asset prices through which monetary policy affects the economy. This is achieved through their effects on the aggregate demand by means of household wealth effect and direct effect on housing expenditure (Mishkin, 2001). Our results allow us to evaluate the intensity of these effects. Regarding the wealth channel, the real income is a driver for the real estate prices. In fact, a decreasing employment growth affects negatively the real income which decreases the purchasing power and housing affordability, this means that house price to income ratio decreases. Therefore, less spending on the housing market will be expected. On the other hand, a decreasing employment growth will generate a lower real income which reduces the accumulated household's wealth. This lowers the value of collateral and then the access for mortgages loans is reduced. Our results show that this channel had an important role in the US during recessions as the savings and loans crisis in the early 1990s and the subprime crisis in 2007, since the DCF in the US has high levels during these two crises. In the UK, the wealth channel is also important. However, the transmission mechanism is based on economic growth rather than employment growth since the DCF shows more important levels between the real estate markets and economic growth in the UK than in the US. The other strong channel between real estate markets and the macroeconomy is the direct effect on housing expenditure. It can be evaluated according to the high levels of the DCF in the US between real estate markets and short term interest rate during the crisis. In fact, the low interest rate that preceded the subprime crisis contributed to lower the cost of financing housing and then increases their prices. Then it becomes more profitable to build housing which increases the housing expenditure. In addition, real estate markets in the UK and the US react differently to institutional shocks that support transparency and independence of the monetary authorities.15 In fact, real estate markets in the UK respond by a decrease in the DCF with the inflation and money supply. In the US, we observe a decrease in the DCF with inflation and the short term interest rate. This means that in order to reduce the effects of the aforementioned macroeconomic variables for each country, the monetary authorities should improve its transparency. This decision affects the expectations of the investors and the households that will be reflected on the real estate prices. However, this can be only a short term policy. These findings provide some insights for future research on the linkage between the direct and the indirect real estate markets and its impact on the monetary policy. Moreover, it would be interesting to conduct a regional analysis for the US real estate markets to investigate their different responses to the macroeconomic environment.