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Capital Inflows and the US Housing Boom

Research output: Contribution to journalArticle

Filipa Sa, Tomasz Wieladek

Original languageEnglish
Pages (from-to)221-256
Number of pages36
JournalJOURNAL OF MONEY CREDIT AND BANKING
Volume47
Issue numberS1
DOIs
Publication statusPublished - Mar 2015

King's Authors

Abstract

We estimate an open-economy vector autoregressive (VAR) model to study the effect of capital-inflow shocks on the U.S. housing market. We look at different external shocks that generate capital inflows to the U.S., in particular “saving-glut” shocks and foreign monetary-policy expansions. The shocks are identified with theoretically robust sign restrictions derived from an open-economy dynamic stochastic general equilibrium (DSGE) model. Our findings suggest that capital inflows that result from “saving-glut” shocks have a positive and persistent effect on real house prices and real residential investment.

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