Abstract
Financial deregulation in 1980 potentially altered key relationships between residential fixed investment (RFI) and key macroeconomic variables. This study uses a vector error correction model to examine relationships between RFI, money, interest rates, and output in pre-deregulation and post-deregulation sub-periods. Results indicate short-term interest rate shocks account for much of RFI variability pre-deregulation. After deregulation, long-term FHA interest rate shocks better account for RFI movements. Results also show that, in the post-deregulation era, RFI shocks have increased predictive power for overall gross domestic product movements. Thus, the study finds altered relationships between RFI and macroeconomic variables.
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Gauger, J., Coxwell Snyder, T. Residential Fixed Investment and the Macroeconomy: Has Deregulation Altered Key Relationships?. The Journal of Real Estate Finance and Economics 27, 335–354 (2003). https://doi.org/10.1023/A:1025842108205
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DOI: https://doi.org/10.1023/A:1025842108205