Current account patterns and national real estate markets

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Main author: Aizenman, Joshua
Other authors: Jinjarak, Yothin
Format: Journal Article           
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id eprints-8748
recordtype eprints
institution SOAS, University of London
collection SOAS Research Online
language English
language_search English
description This paper studies the association between current account and real estate valuation across countries. We find a robust and strong positive association between current account deficits and the appreciation of the real estate prices/(GDP deflator). Controlling for lagged GDP/capita growth, inflation, financial depth, institution, urban population growth and the real interest rate; a one standard deviation increase of the lagged current account deficits is associated with an appreciation of the real estate prices by 10%. This real appreciation is magnified by financial depth, and mitigated by the quality of institutions. Intriguingly, the economic importance of current account variations in accounting for the real estate valuation exceeds that of the other variables, including the real interest rate and inflation. Among the OECD countries, we find evidence of a decline over time in the cross country variation of the real estate/(GDP deflator), consistent with the growing globalization of national real estate markets. Weaker patterns apply to the non-OECD countries in the aftermath of the East Asian crisis.
format Journal Article
author Aizenman, Joshua
author_facet Aizenman, Joshua
Jinjarak, Yothin
authorStr Aizenman, Joshua
author_letter Aizenman, Joshua
author2 Jinjarak, Yothin
author2Str Jinjarak, Yothin
title Current account patterns and national real estate markets
publisher Elsevier
publishDate 2009
url https://eprints.soas.ac.uk/8748/

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