Housing demand shocks, foreign labour inflows and consumption

Arbeitspapier

In this paper we propose a SVAR identification strategy to disentangle two housing demand shocks and their ensuing effect on consumption. This builds on the literature studying the role of the collateral and housing wealth effects on household behaviour. A mix of zero and sign restrictions allows us to disentangle domestic and foreign housing demand shocks, which capture different motivations for owning or using real estate by residents and foreign workers respectively. Using Maltese data over the period 2000Q1-2019Q4 we find that both housing demand shocks generate an increase in consumption, in line with the theoretical predictions from microfounded models with financial frictions. While a domestic housing demand shock drives consumption via both the collateral and housing wealth channels, a foreign housing demand shock operates mainly via the latter. Moreover, these shocks account for about 40% of the fluctuations in house prices and consumption in the long run. We show that from a historical perspective they match well with the dynamics of foreign worker growth and a selection of events that are associated with activity in the housing market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CBM Working Papers ; No. WP/07/2020

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
• Subject: house prices ; housing wealth ; collateral ; identification ; SVAR

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gatt, William ; Ruisi, Germano
• Event: Veröffentlichung
• (who): Central Bank of Malta
• (where): Valletta
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/237307
• Last update: 10.03.2025, 11:45 AM CET