Interest Rate Elasticity of Residential Housing Prices
IMF Working Papers, October 1, 2008
Source details
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- Interest Rate Elasticity of Residential Housing Prices
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Bibliographic details
- Authors: Plamen K Iossifov, Martin Cihak, Amar Shanghavi
- Published: October 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871050.001
Research question and scope
- Examines the interest rate elasticity of housing prices.
- Advances the empirical literature in two directions:
- Uses a commonly used cross-country panel dataset and evaluates the housing price equation using a consistent estimator in the presence of endogenous explanatory variables and a lagged dependent variable.
- Carries out a novel analysis of determinants of residential housing prices in a cross-section of countries.
Key findings
- The short-term interest rate, and hence monetary policy, has a sizable impact on residential housing prices.
Methodology highlights
- Cross-country panel dataset analysis with a consistent estimator that accounts for:
- Endogenous explanatory variables.
- A lagged dependent variable.
- Novel cross-sectional analysis of determinants of residential housing prices across countries.
Subjects and keywords
- Subject: Housing, Housing prices, Mortgages, Real estate prices, Short term interest rates
- Keywords: elasticity, GDP, housing price, interest rate, price, quote, WP
Implications
- Monetary policy, via short-term interest rates, can have a sizable influence on residential housing prices, implying that central bank interest-rate decisions are an important determinant of housing market dynamics.
IMF Working Paper — Interest Rate Elasticity of Residential Housing Prices (Working Paper No. 2008/247), authors: Plamen K Iossifov, Martin Cihak, Amar Shanghavi.