The impact of fiscal policy on housing in the U.S.
Miles, William
Miles, William
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Issue Date
2025-01-29
Type
Article
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Keywords
Fiscal policy,Housing,Finance,Government spending
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Citation
Miles, W. (2025). The impact of fiscal policy on housing in the U.S. Journal of Economic Insights, 50(2). https://journalofeconomicinsight.com/index.php/joei/article/view/1333
Abstract
Theory and empirical evidence have provided contradictory predictions and findings on the impact of government spending on housing investment and home values. Previous empirical studies have employed vector-autoregressions. Given the deficiencies of VARs, we utilize local linear projections. In addition, we directly compare the impact of government spending on both housing investment (residential investment, permits, sales, housing starts) and non-residential investment. We find fiscal expansion leads to unambiguously greater crowding out of housing activity than for non-housing investment. Moreover, housing is more sensitive to monetary policy than non-residential investment. Thus, housing appears more sensitive to policy shocks than non-housing capital spending. In contrast to housing investment, home prices, while reacting negatively to government spending shocks, don’t exhibit the magnitude of the reaction of housing, or even non-housing investment. This likely reflects the sticky nature of house prices, with falling purchases leading to greater “time on market” more than falling prices.
Table of Contents
Description
Publisher
Missouri Valley Economic Association
Journal
Journal of Economic Insight
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Series
Digital Collection
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PubMed ID
DOI
ISSN
2572-7362
2639-6858
2639-6858