Interest Rate Elasticity of Residential Housing Prices

34 Pages Posted: 18 Dec 2008

See all articles by Martin Čihák

Martin Čihák

International Monetary Fund (IMF)

Plamen K. Iossifov

International Monetary Fund (IMF) - African Department

Amar Shanghavi

affiliation not provided to SSRN

Date Written: October 2008

Abstract

We examine the interest rate elasticity of housing prices, advancingthe empirical literature in two directions. First, we take a commonly used cross-country panel dataset and evaluate the housing price equation using a consistent estimator in the presence of endogenous explanatory variables and a lagged dependent variable. Second, we carry-out a novel analysis of determinants of residential housing prices in a cross-section of countries. Our results show that the short-term interest rate, and hence monetary policy, has a sizable impact on residential housing prices.

Keywords: Housing prices, Real estate prices, Interest rate policy, Economic models

Suggested Citation

Cihak, Martin and Iossifov, Plamen K. and Shanghavi, Amar, Interest Rate Elasticity of Residential Housing Prices (October 2008). IMF Working Papers, Vol. , pp. 1-32, 2008. Available at SSRN: https://ssrn.com/abstract=1316715

Martin Cihak (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Plamen K. Iossifov

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Amar Shanghavi

affiliation not provided to SSRN ( email )

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