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Housing and the Financial Crisis$
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Edward L. Glaeser and Todd Sinai

Print publication date: 2013

Print ISBN-13: 9780226030586

Published to Chicago Scholarship Online: January 2014

DOI: 10.7208/chicago/9780226030616.001.0001

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International Capital Flows and House Prices

International Capital Flows and House Prices

Theory and Evidence

(p.235) 6 International Capital Flows and House Prices
Housing and the Financial Crisis

Jack Favilukis

David Kohn

Sydney C. Ludvigson

Stijn Van Nieuwerburgh

University of Chicago Press

This chapter examines the empirical relationship between house price changes and international capital flows, focusing on the boom-bust period in the housing market from 2000 to 2010. Foreign capital flows into safe US securities—US Treasury and Agency bonds—played a key role in understanding the low interest rates in the last decade and quantitatively account for all of the upward trend in the US net foreign liability position over this period. It is argued that easy credit caused the run-up in housing prices.

Keywords:   housing prices, foreign capital flows, housing market, US securities, interest rates, credit, bank lending

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