Single housing starts and macroeconomic activity: an application of generalized impulse response analysis

Abstract

Most studies that have examined the relationship between the housing market and the macroeconomy have focused on how changes in housing supply affect real activity and the like. In this paper, the possibility that housing starts respond to sudden changes or shocks to macroeconomic factors is explicitly accounted for. The empirical methodology employs the recently developed technique of generalized impulse response analysis Pesaran and Shin (1998). The results highlight the endogeneity that exists among the housing market and macroeconomic activity.

Acknowledgements

A previous version of this paper was presented at the March 2003 meeting of the Midwest Economics Association in St. Louis, MO. We thank session participants for helpful comments. The usual disclaimer applies.