The housing market, macroeconomic activity and fiancial innovation: an empirical analysis of US data

The relationship between macroeconomic activity and residential expenditure over the period 1959:I to 1991:I has been examined. The analysis is conducted using varriance decompostions (VDCs) and historical decompostions (HDs). The VDCs indicate that shocks to the money stock. Output and interest rates have significant impact on residental expenditure. The HDs indicate that shocks to macroeconomic variable are relatively unimportant in the determination of residential expenditure in the period following the extensive fiancial deregulation in the early 1980s.