Booms and busts in housing markets: Determinants and implications |
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Authors: | Luca Agnello Ludger Schuknecht |
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Institution: | aBanque de France, Service d’Etude Des Politiques de Finances Publiques (DGEI-DCPM-FIPU), 31 Rue Croix des Petits Champs, 75001 Paris, France;bUniversity of Palermo, Department of Economics, Italy;cEuropean Central Bank, Directorate General Economics (DG-E), Kaiserstraße 29, D-60311 Frankfurt am Main, Germany |
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Abstract: | This study looks at the characteristics and determinants of booms and busts in housing prices for a sample of eighteen industrialised countries over the period 1980–2007. From an historical perspective, we find that recent housing booms have been amongst the longest in the past four decades. Estimates of a Multinomial Probit model suggest that domestic credit and interest rates have a significant influence on the probability of booms and busts occurring. Moreover, international liquidity plays a significant role for the occurrence of housing booms and—in conjunction with banking crises—for busts. We also find that the deregulation of financial markets has strongly magnified the impact of the domestic financial sector on the occurrence of booms. |
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Keywords: | JEL classification: E32 E51 E52 |
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