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Current account patterns and national real estate markets

Aizenman, Joshua; Jinjarak, Yothin

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Authors

Joshua Aizenman

Yothin Jinjarak



Abstract

This paper studies the association between current account and real estate valuation across countries. We find a robust and strong positive association between current account deficits and the appreciation of the real estate prices/(GDP deflator). Controlling for lagged GDP/capita growth, inflation, financial depth, institution, urban population growth and the real interest rate; a one standard deviation increase of the lagged current account deficits is associated with an appreciation of the real estate prices by 10%. This real appreciation is magnified by financial depth, and mitigated by the quality of institutions. Intriguingly, the economic importance of current account variations in accounting for the real estate valuation exceeds that of the other variables, including the real interest rate and inflation. Among the OECD countries, we find evidence of a decline over time in the cross country variation of the real estate/(GDP deflator), consistent with the growing globalization of national real estate markets. Weaker patterns apply to the non-OECD countries in the aftermath of the East Asian crisis.

Citation

Aizenman, J., & Jinjarak, Y. (2009). Current account patterns and national real estate markets. Journal of Urban Economics, 66(2), 75-89. https://doi.org/10.1016/j.jue.2009.05.002

Journal Article Type Article
Publication Date Sep 1, 2009
Deposit Date Jul 5, 2010
Publicly Available Date Mar 10, 2025
Journal Journal of Urban Economics
Print ISSN 0094-1190
Electronic ISSN 1095-9068
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 66
Issue 2
Pages 75-89
DOI https://doi.org/10.1016/j.jue.2009.05.002

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