A Two-Way Relationship

The current financial market problems show that the fluctuations of real estate prices have important consequences for the business cycle.

The article analyzes how real estate prices respond to macroeconomic changes and how their development affects macroeconomic indicators such as gross domestic product, inflation and interest rates. It concludes that real interest rates and GDP are key determinants of real estate price movements, whereas the macroeconomic effects of these movements differ in the countries studied due to differences in the national financial systems which ultimately has important implications for monetary policy