Energy inflation and house price corrections

Andreas Breitenfellner, Jesus Crespo Cuaresma and Philipp Mayer

Energy Economics, 2015, vol. 48, issue C, 109-116

Abstract: We analyze empirically the role played by energy inflation as a determinant of downward corrections in house prices. Using a dataset for 18 OECD economies spanning the last four decades, we identify periods of downward house price adjustment and estimate conditional logit models to measure the effect of energy inflation on the probability of these house price corrections after controlling for other relevant macroeconomic variables. Our results give strong evidence that increases in energy price inflation raise the probability of such corrective periods taking place. This phenomenon could be explained by various channels: through the adverse effects of energy prices on economic activity and income reducing the demand for housing; through the particular impact on construction and operation costs and their effects on the supply and demand of housing; through the reaction of monetary policy on inflation withdrawing liquidity and further reducing demand; through improving attractiveness of commodity versus housing investment on asset markets; or through a lagging impact of common factors on both variables, such as economic growth. Our results contribute to the understanding of the pass-through of oil price shocks to financial markets and imply that energy price inflation should serve as a leading indicator for the analysis of macro-financial risks.

Keywords: Energy prices; Housing market; Financial crisis; Conditional logit model (search for similar items in EconPapers)
JEL-codes: C33 G01 Q43 R21 R31 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988314002059
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Energy Inflation and House Price Corrections (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:48:y:2015:i:c:p:109-116

DOI: 10.1016/j.eneco.2014.08.023

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().