Evidence on the Relationship between Housing and Consumption in the US: A State-Level Analysis
Chadi S. Abdallah
Miami University - Farmer School of Business - Department of Economics
William D. Lastrapes
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics
June 15, 2012
Journal of Money, Credit, and Banking, Forthcoming
We estimate the dynamic effects of aggregate US housing market shocks on state-level retail sales and home prices from 1976 to 2008. We use a common factor VAR model to account for the dynamics of the state-level variables, and identify housing demand and supply shocks using a signs-restriction approach. We find that local spending and real house prices generally respond positively but with a lag to aggregate housing demand shocks, that these responses vary significantly across states, and that differences in the level of mortgage market development most likely explain this variation.
Number of Pages in PDF File: 42
Keywords: Housing wealth, houe prices, retail sales, collateral, FAVAR
JEL Classification: E20, E21, C32
Date posted: August 10, 2010 ; Last revised: March 8, 2013
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