House Prices and the Macroeconomy in Europe: Results from a Structural VAR Analysis
ECB Working Paper No. 18
65 Pages Posted: 29 Jul 2001
Date Written: April 2000
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: Suggested Citation