TY - UNPD A1 - Kilian, Lutz A1 - Zhou, Xiaoqing T1 - The propagation of regional shocks in housing markets: evidence from oil price shocks in Canada T2 - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 606 N2 - Shocks to the demand for housing that originate in one region may seem important only for that regional housing market. We provide evidence that such shocks can also affect housing markets in other regions. Our analysis focuses on the response of Canadian housing markets to oil price shocks. Oil price shocks constitute an important source of exogenous regional variation in income in Canada because oil production is highly geographically concentrated. We document that, at the national level, real oil price shocks account for 11% of the variability in real house price growth over time. At the regional level, we find that unexpected increases in the real price of oil raise housing demand and real house prices not only in oil-producing regions, but also in other regions. We develop a theoretical model of the propagation of real oil price shocks across regions that helps understand this finding. The model differentiates between oil-producing and non-oil-producing regions and incorporates multiple sectors, trade between provinces, government redistribution, and consumer spending on fuel. We empirically confirm the model prediction that oil price shocks are propagated to housing markets in non-oil-producing regions by the government redistribution of oil revenue and by increased interprovincial trade. T3 - CFS working paper series - 606 KW - house price KW - regional heterogeneity KW - oil price KW - redistribution KW - resource boom KW - regional propagation KW - Canada Y1 - 2018 UR - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/47447 UR - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-474472 UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3274347 IS - This version: October 22, 2018 PB - Center for Financial Studies CY - Frankfurt, M. ER -