Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266641 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 194/2022
Publisher: 
Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin
Abstract: 
The paper provides a framework for theorising the role of house price cycles in national growth models. We synthesise Minskyan approaches with comparative political economy (CPE) by arguing that institutions influence the extent to which countries experience what we call 'house price-driven growth models'. First, we argue that house price dynamics have been undertheorized in existing growth models analysis. Finance-led models can be properly understood only against the background of rising house prices that stimulate consumption through wealth effects and investment through construction. Second, we identify behavioural and Minskyan theories of housing cycles as suitable frameworks to theorise the impact of housing on growth. However, this literature does not provide an analysis of cross-country differences in housing cycles. Third, drawing on the CPE literature on housing systems, we argue that institutions such as homeownership rates and mortgage-credit encouraging institutions can explain differences in the intensity of housing cycles. We provide preliminary empirical support for this framework from a cross-country analysis. Our results show strong cross-country heterogeneity in the intensity of housing cycles. Countries with more intense house price cycles also tend to exhibit more volatile business and debt cycles. Homeownership rates and mortgage-credit encouraging institutions are positively correlated with the volatility of house price cycles.
Subjects: 
Post-Keynesian Economics
Comparative Political Economy
growth models
housing
house price cycles
JEL: 
E32
O57
R21
R31
B52
Document Type: 
Working Paper

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