Housing, Affordability and the Macroeconomy
Housing, Affordability and the Macroeconomy
Chapter 8 marks the beginning of the book’s policy discussion. Not only is housing strongly affected by the macroeconomy, but housing also affects the economy as a whole. Although housebuilding is a modest part of economic activity, the indirect effects of housing are powerful. Chapter 8 considers these interlinkages. Early research, which concentrated on the relationship between housing and consumer expenditure, generated considerable controversy. The Global Financial Crisis stimulated further analysis, emphasising the role of housing wealth particularly in providing collateral for loans. Recent international studies have considered the impact of liberalisation of international capital markets; the importance of housing and housing finance for macroeconomic stabilisation; and in reverse the importance of macro policy for default, particularly in the light of the US sub-prime crisis. The chapter also discusses the extent to which housing becomes more sensitive to changes in monetary policy instruments in a liberalised environment.
Keywords: Global Financial Crisis, Consumers’ expenditure, Housing finance, Macro stabilisation, Sub-prime crisis, Mortgage default
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