International Capital Flows and House Prices: Theory and Evidence
David Kohn; Jack Favilukis; Sydney Ludvigson y Stijn Van Nieuwerburgh
Housing and the Financial Crisis, NBER Cambridge, MA. Chapter 8, 2013.
The last fifteen years have been marked by a dramatic boom-bust cycle in real estate prices, accompanied by economically large fluctuations in international capital flows. We argue that changes in international capital flows played, at most, a small role in driving house price movements in this episode and that, instead, the key causal factor was a financial market liberalization and its subsequent reversal. Using observations on credit standards, capital flows, and interest rates, we find that a bank survey measure of credit supply, by itself, explains 53 percent of the quarterly variation in house price growth in the U.S. over the period 1992-2010, while it explains 66 percent over the period since 2000. By contrast, once we control for credit supply, various measures of capital flows, real interest rates, and aggregate activity collectively add less than 5% to the fraction of variation explained for these same movements in home values. Credit supply retains its strong marginal explanatory power for house price movements over the period 2002-2010 in a panel of international data, while capital flows have no explanatory power.
Keywords: housing boom and bust, global savings glut, foreign capital flows.
Etiquetas: foreign capital flows, global savings glut, housing boom and bust