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Macroeconomic effects of a decline in housing prices in Sweden
Sveriges riksbank, Stockholm, Sweden.
National Institute of Economic Research, Stockholm, Sweden.
National Institute of Economic Research, Stockholm, Sweden.ORCID iD: 0000-0002-4840-7649
2016 (English)In: Journal of Policy Modeling, ISSN 0161-8938, E-ISSN 1873-8060, Vol. 38, no 2, 242-255 p.Article in journal (Refereed) Published
Abstract [en]

Real housing prices in Sweden have roughly doubled the last 15 years. The rise in housing prices has coincided with a rise in household debt, sparking debate about both the presence of financial imbalances in the Swedish economy and the macroeconomic effects that a correction of these imbalances would have. In this paper, we conduct a quantitative assessment of the macroeconomic effects of a considerable decline inhousing prices using a Bayesian VAR model. Results show that a 20% drop in housing prices would lead to a recession-like impact on household consumption and unemployment. The impact would be even greater if falling housing prices coincided with a global economic downturn. This information should be useful to policymakers. If a fall in housing prices were to materialize, more expansionary stabilization policies would be motivated in order to dampen the effects on the real economy.

Place, publisher, year, edition, pages
Elsevier, 2016. Vol. 38, no 2, 242-255 p.
Keyword [en]
Bayesian VAR, House prices, Private consumption, Unemployment, Small open economy
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:oru:diva-58290DOI: 10.1016/j.jpolmod.2016.02.011ISI: 000377228100003Scopus ID: 2-s2.0-84961262543OAI: oai:DiVA.org:oru-58290DiVA: diva2:1115479
Available from: 2017-06-26 Created: 2017-06-26 Last updated: 2017-07-25Bibliographically approved

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CiteExportLink to record
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Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
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  • text
  • asciidoc
  • rtf