Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235106 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
KOF Working Papers No. 492
Publisher: 
ETH Zurich, KOF Swiss Economic Institute, Zurich
Abstract: 
We examine the dynamic effects of housing demand shocks on a large set of U.S. macroeconomic series and detailed household balance sheet components for four wealth percentile groups. The results show that a positive housing shock translates into a large and persistent boom of economic activity, an expansion of credit and an increase of interest rates. While households of all wealth percentile groups make heavy use of home equity-based borrowing, we find a larger consumer spending sensitivity for weaker balance sheet households. This is supported by the elasticities of consumption with respect to house prices implied by our structural dynamic factor model. A historical decomposition suggests that housing demand shocks have largely contributed to the pronounced drop in poorer households' consumption during the Great Recession. Variance decompositions indicate that the identified housing shock has high explanatory power for key economic indicators, housing indices and household balance sheet series.
Subjects: 
Housing demand shocks
Household balance sheets
Bayesian dynamic factor model
JEL: 
D31
E21
E32
E44
R31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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