Title

Housing prices, stock prices and the US economy

Document Type

Article

Publication Date

12-20-2017

Publication Title

Applied Economics

Volume

49

First Page

5916

Last Page

5922

Keywords

Granger causality, Housing prices, stock prices, US economy, vector error correction model

Abstract

© 2017 Informa UK Limited, trading as Taylor & Francis Group. This paper studies the relationship between housing prices, stock prices, interest rates and aggregate output in the US using monthly data from 1993 to 2014. Evidence from causality tests and a variance decomposition procedure suggest that stock prices have a much larger effect on aggregate output in the US economy than do either housing prices or interest rates. Instead, the wealth effect created by changes in stock prices has a relatively large impact on US aggregate output. Separate estimations and variance decompositions for the sample periods 1993–2001, 2002–2008 and 2009–2014 show that the impact of housing prices relative to stock prices has been waning over time.

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