The co-movement of housing price and the growth of output

Abstract

In order to find out the exact periods of housing bubble burst and the co-movementbetween housing price and the real growth of output in the U.S., this paper adoptsHamilton’s Markov-Switching Model (1989)The findings of this paper are as follows: housing price is procyclical in movementwith the real growth of output during 1970s’, 1980’s, 1990s’ and 2000s’ periods.These results suggest another explanation that when there are extremely large shockssuch as oil shocks, house price is procyclical in movement with the real growth ofoutput, and the procyclical movement occurs in conjunction with big shocks includinghousing bubble bursts in 2000’s periods