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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by David Kohn

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Working Papers

January 2012International Capital Flows and House Prices: Theory and Evidence
with Jack Favilukis, Sydney C. Ludvigson, Stijn Van Nieuwerburgh: w17751
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, r...

Published: International Capital Flows and House Prices: Theory and Evidence, Jack Favilukis, David Kohn, Sydney C. Ludvigson, Stijn Van Nieuwerburgh. in Housing and the Financial Crisis, Glaeser and Sinai. 2013

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