House Prices and Economic Growth

Norman Miller ⋅ Liang Peng ⋅ Michael Sklarz

Abstract Using quarterly data for all 379 metropolitan statistic areas (MSAs) in the U.S. from 1980:1 to 2008:2, this paper empirically studies the effect of house prices on local Gross Metropolitan Product (GMP). We compare the effects of predictable and unpredictable house price changes, which we use to capture the collateral and wealth effects of house prices respectively. We further analyze the relationship between the effects and household borrowing constraints, as well as the temporal pattern of the effects.

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Our analysis provides the following findings. First, house price changes have significant effects on GMP growth, and the effect of predictable changes (the collateral effect) is about three times stronger than the effect of unpredictable changes (the wealth effect). Second, the persistent component of predictable changes has a stronger collateral effect than the novel component. Third, when households are more financially constrained, the collateral effect is stronger, the wealth effect is weaker, and the total effect remains unchanged. Finally, the effects last for eight quarters, and peak on the fourth quarter after house price changes take place.

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How do rising house prices affect the local economy?

World Economic Forum

The Role of Housing in the Economy

A Final Report by

Regeneris Consulting and Oxford Economics

Housing and economic development: Moving forward together

Catherine Glossop

中国城市竞争力报告No.15（简版）

房价体系：

中国转型升级的杠杆与陷阱

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主 编：倪鹏飞

副主编：侯庆虎 丁如曦 沈立

特邀主编：沈建法 林祖嘉 刘成昆

中国城市竞争力报告No.15（简版）

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