Booms and Busts in Housing Markets: Determinants and Implications

By Luca Agnello, Ludger Schuknecht. Social Science Research Network, 2009

447 citations recorded by the source corpus.

This study looks at real estate price booms and busts in industrialised countries. It identifies major and persistent deviations from long term trends for 18 countries and estimates the probabilities of their occurrence using a Random Effects Panel Probit model over the period 1980-2007. It finds that 1) most recent housing booms have been very persistent and of a significant magnitude; 2) there appears to be a strong correlation between the persistence and magnitude of booms and subsequent busts; 3) economic costs (in terms of GDP losses during the post-boom phase) depend significantly on the magnitude and duration of the boom and money and credit developments during that period; 4) a number of policy variables, including short term interest rates, local and global money and credit developments, and the incidence of mortgage market deregulation affect significantly the probability of experiencing booms and busts; and 5) the model is quite successful in identifying booms and busts early on.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/5c550533000ab5156c3a858ef0a6b6198e446ee3

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Citations in the corpus

Monetary Policy and the Global Housing Bubble (2011, unknown): “Looking backward, Agnello and Schuknecht (2009) present a model in which a variety of factors, including monetary policy variables, aid in the detection of a bubble.”
FISCAL POLICY AND ASSET PRICES (2013, unknown): “In order to detect the bust episodes, we use a non-parametric approach and, following Agnello and Schuknecht (2009), we de ne a bust in housing prices as a major and persistent downward deviation from their trend computed by a one-sided Hodrick-Prescott (HP) lter with a smoothing parameter of…”
Episodes of Exuberance in Housing Markets: In Search of the Smoking Gun (2016, background): “…prices in 62 United States metro areas depend on a set of economic variables that proxy for information costs, supply costs, and expectations.4 Agnello and Schuknecht (2011) and Rousová and van den Noord (2011), among other recent studies, look at fundamental predictors of housing booms and…”
Housing finance and real-estate booms: A cross-country perspective (2015, background): “However, for housing booms, the focus is usually on variations in real house prices (Agnello and Schuknecht, 2011).”
The local geographies of the financial crisis: from the housing bubble to economic recession and beyond (2011, background): “And there is interest in whether such work could provide ‘early-warning’ diagnostics so that appropriate policy actions could be undertaken to prevent any future incipient price booms turning into full-blown bubbles (see, for example, Agnello and Schuknecht, 2009).”
What are the effects of fiscal policy on asset markets (2011, background): “…the role that fiscal and external imbalances, oil prices, credit and stock markets or even duration dependence play on the likelihood of an expansion and contraction ending (Vinhas de Souza, 2006; Agnello and Schuknecht, 2009; Granville and Mallick, 2009a; Agnello and Nerlich, 2010; Castro, 2010).”
How does fiscal policy react to wealth composition and asset prices (2012, background): “G( ; c; st) = [1 + exp f (st c)g] 1 ; > 0: (4)”