House Prices and the Macroeconomy in Europe: Results from a Structural VAR Analysis

ECB Working Paper No. 18

65 Pages Posted: 29 Jul 2001

See all articles by Matteo M. Iacoviello

Matteo M. Iacoviello

Federal Reserve Board - Trade and Financial Studies

Date Written: April 2000

Abstract

A structural vector autoregressive (SVAR) approach is used to identify the forces driving house prices fluctuations in France, Germany, Italy, Spain, Sweden and the UK over the period 1970-1998. Quarterly time series for real house prices, GDP, money, inflation and interest rates are characterised by a multivariate process driven by supply, nominal, monetary, inflationary and demand shocks. It is found that: (1) tight money leads to a concomitant fall in house prices and GDP; (2) the house price responses to a monetary shock can be partly justified by the dif-ferent housing and financial market institutions across countries; (3) monetary and demand shocks drive most of the short-run house price volatility. The paper also interprets the main house price cycles and their links with the real economy in light of the estimates shocks.

Keywords: House Prices, vector autoregressions, monetary policy

JEL Classification: C32, E32, E52, R21

Suggested Citation

Iacoviello, Matteo M., House Prices and the Macroeconomy in Europe: Results from a Structural VAR Analysis (April 2000). ECB Working Paper No. 18. Available at SSRN: https://ssrn.com/abstract=277228

Matteo M. Iacoviello (Contact Author)

Federal Reserve Board - Trade and Financial Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

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