Scandinavian Working Papers in Economics

Working Papers,
National Institute of Economic Research

No 138: Macroeconomic Effects of a Decline in Housing Prices in Sweden

Peter Gustafsson (), Pär Stockhammar () and Pär Österholm ()
Additional contact information
Peter Gustafsson: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden
Pär Stockhammar: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden
Pär Österholm: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden

Abstract: Real housing prices in Sweden have roughly doubled the last 15 years. The rise in housing prices has coincided with a rise in household debt, sparking debate about both the presence of financial imbalances in the Swedish economy and the macroeconomic effects that a correction of these imbalances would have. In this paper, we conduct a quantitative assessment of the macroeconomic effects of a considerable decline in housing prices using a Bayesian VAR model. Results show that a 20 per cent drop in housing prices would lead to a recession-like impact on household consumption and unemployment. The impact would be even greater if falling housing prices coincided with a global economic downturn.

Keywords: Bayesian VAR; Housing prices; Household consumption; Unemployment; Small open economy

JEL-codes: C32; F43

22 pages, March 17, 2015

Full text files

Working-Paper-138-Macroeconomic-Effects-of-a-Decline-in-Housing-Prices-in-Sweden.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Sarah Hegardt Grant ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:36:17.