How Do Housing Markets Affect Local Consumer Prices? – Evidence from U.S. Cities

No 398, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: Analyzing city-level retail price data for a variety of consumer products, we find that house price changes lead local consumer price changes, but not vice versa. The transmission of the house price changes differs substantially across locations and products. It also hinges on the nature of housing market shocks; housing supply shocks propagate through the cost-push channel via local cost and markup effects, while housing demand shocks transmit through conventional wealth and collateral effects. Our findings suggest that housing may exert greater impacts on the local cost-of-living and consumer welfare than what is reflected in its share in CPI.

Keywords: Housing market; Consumer price; U.S. cities; Pass-through; FAVAR model; VECM (search for similar items in EconPapers)
JEL-codes: E21 E31 R20 R30 (search for similar items in EconPapers)
Pages: 40
Date: 2020-08-27
New Economics Papers: this item is included in nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:88669

DOI: 10.24149/gwp398

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