Energy Inflation and House Price Corrections

Breitenfellner, Andreas and Crespo Cuaresma, Jesus ORCID: and Mayer, Philipp (2015) Energy Inflation and House Price Corrections. Energy Economics, 48. pp. 109-116. ISSN 0140-9883


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We analyze empirically the role played by energy inflation as a determinant of downward corrections in house prices. Using a dataset for 18 OECD economies spanning the last four decades, we identify periods of downward house price adjustment and estimate conditional logit models to measure the effect of energy inflation on the probability of these house price corrections after controlling for other relevant macroeconomic variables. Our results give strong evidence that increases in energy price inflation raise the probability of such corrective periods taking place. This phenomenon could be explained by various channels: through the adverse effects of energy prices on economic activity and income reducing the demand for housing; through the particular impact on construction and operation costs and their effects on the supply and demand of housing; through the reaction of monetary policy on inflation withdrawing liquidity and further reducing demand; through improving attractiveness of commodity versus housing investment on asset markets; or through a lagging impact of common factors on both variables, such as economic growth. Our results contribute to the understanding of the pass-through of oil price shocks to financial markets and imply that energy price inflation should serve as a leading indicator for the analysis of macro-financial risks. (authors' abstract)

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version may require a subscription. The original publication is available at
Keywords: Energy Prices / Housing Market / Financial Crisis / Conditional Logit Model
Classification Codes: JEL C33, G01, Q43, R21, R31
Divisions: Departments > Volkswirtschaft
Version of the Document: Accepted for Publication
Depositing User: ePub Administrator
Date Deposited: 27 Nov 2014 14:37
Last Modified: 13 Aug 2020 02:49
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