Growth, housing, and global imbalances

Franjo, Luis, Lambertini, Luisa and Stepanchuk, Serhiy (2023) Growth, housing, and global imbalances. International Economic Review. (doi:10.1111/iere.12674).

Record type: Article

Abstract

In the decade leading to the Great Recession, the United States experienced rising house prices and current account deficits, whereas China and other fast-growing Asian economies saw rising house prices accompanied by current account surpluses. To explain these differences, we study a transition path in a two-country life-cycle model with housing once the two economies become financially integrated. We allow for asymmetries in productivity growth, the loan-to-value ratio, the life-cycle wage profile, and the population structure across countries. Our findings highlight that differences in the life-cycle pattern of the wage income profile are key to obtaining our results.

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Accepted/In Press date: 16 October 2023

e-pub ahead of print date: 16 October 2023

Additional Information: Publisher Copyright: © 2023 The Authors. International Economic Review published by Wiley Periodicals LLC on behalf of the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.