Real and Nominal Interest Rates and the Demand for Housing

Robert M. Schwab , Journal of Urban Economics 13(2) , 181-195 , March 1983.

This paper is an empirical study of the relationship between inflation expectations and the demand for housing. The major findings are that housing demand is a function of both expected inflation and the real interest rate but that demand cannot be specified as a function of the nominal rate. It is also shown that expected inflation has a larger impact on those households that are likely to be constrained by capital market imperfections.

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