House Price Growth Synchronization and Business Cycle Alignment

49 Pages Posted: 25 Feb 2021 Last revised: 28 May 2021

See all articles by Cheol S. Eun

Cheol S. Eun

affiliation not provided to SSRN

Lingling Wang

University of Connecticut - Department of Finance

Tim Zhang

University of Wyoming, College of Business

Date Written: April 28, 2021

Abstract

Using four decades of data, we provide novel evidence that the increasing interstate synchronization of house price growth leads to higher business cycle alignment across U.S. states. The relation is stronger between states with similar banking development and in non-tradable sectors, and is channeled through both the collateral and direct wealth effects. Results also hold at the MSA level and are robust to various endogeneity controls, including a Bartik-type instrument. Overall, our findings suggest that the housing market integration across regions can lead to amplified business cycles associated with an increased systemic economic risk at the country level.

Keywords: House price growth synchronization; Business cycle alignment; Housing collateral; Consumption growth; Banking integration and development

JEL Classification: G21; E32; O47; R30; R11

Suggested Citation

Eun, Cheol S. and Wang, Lingling and Zhang, Tim, House Price Growth Synchronization and Business Cycle Alignment (April 28, 2021). University of Connecticut School of Business Research Paper No. 21-06, Available at SSRN: https://ssrn.com/abstract=3790586 or http://dx.doi.org/10.2139/ssrn.3790586

Cheol S. Eun

affiliation not provided to SSRN

Lingling Wang (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

Tim Zhang

University of Wyoming, College of Business

1000 E. University Avenue
Department 3275
Laramie, WY 82071
United States

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