Booms and busts in housing markets: determinants and implications

Luca Agnello () and Ludger Schuknecht

No 1071, Working Paper Series from European Central Bank

Abstract: This study looks at real estate price booms and busts in industrialised countries. It identifies major and persistent deviations from long term trends for 18 countries and estimates the probabilities of their occurrence using a Random Effects Panel Probit model over the period 1980-2007. It finds that 1) most recent housing booms have been very persistent and of a significant magnitude; 2) there appears to be a strong correlation between the persistence and magnitude of booms and subsequent busts; 3) economic costs (in terms of GDP losses during the post-boom phase) depend significantly on the magnitude and duration of the boom and money and credit developments during that period; 4) a number of policy variables, including short term interest rates, local and global money and credit developments, and the incidence of mortgage market deregulation affect significantly the probability of experiencing booms and busts; and 5) the model is quite successful in identifying booms and busts early on. JEL Classification: E32, R21, R31

Keywords: Booms and busts; house prices; housing market (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-ure
Note: 1145200
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Related works:
Journal Article: Booms and busts in housing markets: Determinants and implications (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20091071

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