Mortgage Spreads, House Prices, and Business Cycles in Emerging Countries

51 Pages Posted: 1 Mar 2018 Last revised: 18 Jul 2019

See all articles by Jaroslav Horvath

Jaroslav Horvath

University of New Hampshire

Philip Rothman

East Carolina University

Date Written: July 16, 2019


We investigate an unexplored link between the US mortgage spread and business cycle and house price fluctuations in emerging market economies (EMEs). An increase in the US mortgage spread leads to substantially lower output, investment, consumption, house and stock prices, and to an improvement in the trade balance-to-output ratio in EMEs. We find that the financial channel is the main transmission mechanism through which US mortgage spread shocks affect business and house price cycles in EMEs. The US mortgage spread remains a key driver of aggregate economic activity in EMEs when extending the baseline model with alternative domestic and foreign variables, such as global financial risk, and considering alternative country subgroups.

Keywords: Mortgage spreads; House prices; International business cycles; Small open economy.

JEL Classification: F41, F44, G15

Suggested Citation

Horvath, Jaroslav and Rothman, Philip, Mortgage Spreads, House Prices, and Business Cycles in Emerging Countries (July 16, 2019). Available at SSRN: or

Jaroslav Horvath (Contact Author)

University of New Hampshire ( email )

Department of Economics
10 Garrison Avenue
Durham, NH 03824
United States
6038620867 (Phone)

HOME PAGE: http://

Philip Rothman

East Carolina University ( email )

Dept of Economics
Brewster Building
Greenville, NC 27858
United States

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