Residential Fixed Investment and the Macroeconomy: Has Deregulation Altered Key Relationships? |
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Authors: | Jean Gauger Tricia Coxwell Snyder |
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Affiliation: | (1) Department of Economics, The University of Tennessee, 526 Stokely Management Center, Knoxville, TN 37996, USA;(2) Department of Economics and Finance, William Paterson University, P.O. Box 920, Wayne, NJ 07474, USA |
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Abstract: | Financial deregulation in 1980 potentially altered key relationships between residential fixed investment (RFI) and key macroeconomic variables. This study uses a vector error correction model to examine relationships between RFI, money, interest rates, and output in pre-deregulation and post-deregulation sub-periods. Results indicate short-term interest rate shocks account for much of RFI variability pre-deregulation. After deregulation, long-term FHA interest rate shocks better account for RFI movements. Results also show that, in the post-deregulation era, RFI shocks have increased predictive power for overall gross domestic product movements. Thus, the study finds altered relationships between RFI and macroeconomic variables. |
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Keywords: | residential investment deregulation monetary policy |
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