Abstract

The devastating consequences of the housing bubble, which took place in several OECD economies in 2007, are still present in some of them, thereby preventing economic revival. In this context, it is important to analyse the behaviour of investment in housing during the pre- and post-crisis period. This so since traditionally residential investment has recovered quickly after an economic collapse. Moreover, the dynamics of the residential construction industry need to be analysed since this sector can be considered a strategic one, due to its high impact on GDP , employment and the all important ‘pulling’ effects, which arise from it. In addition to that, more research on residential investment is needed in view of the lack of a consensus in the economic literature regarding the specification of an investment function for residential assets. The theoretical framework, which is developed in this contribution relates residential investment to a number of variables such as real disposable income, real house prices, real interest rates for housing loans, unemployment rates and the volume of banking credit. This framework is subsequently estimated in the case of 17 OECD economies over the period 1970-2013 employing the Autoregressive Distributed Lag (ARDL) bounds cointegration technique.

Ana Rosa González-Martínez is a senior economist of the international modelling team, Cambridge Econometrics. She was awarded her PhD at the University of the Basque Country (Spain) in January 2014. An important part of the research which was carried out for her thesis “Modelling the Housing Market: Theoretical and Empirical Analyses of Some OECD Countries, 1970-2011” was carried out while she was a visiting scholar at the Department of Land Economy, University of Cambridge, from September 2011 until June 2013. Ana Rosa González-Martínez has co-authored several papers, which have been published in journals such as The Manchester School, International Review of Applied Economics, Journal of Post Keynesian Economics, Panoeconomicus, INTERVENTION : European Journal of Economics and Economic Policies; Temas para el debate; and Análise Econômica.