Housing and the Great Depression

Abstract

This paper considers the structural stability of the relationship between the real housing price and real GDP per capita for an annual sample that includes the Great Depression. We test for structural change in parameter values, using a sample of annual US data from 1890 to 1952. The paper examines the long-run and short-run dynamic relationships between the real housing price and real GDP per capita to determine if these relationships experienced structural change over the sample period. We find that temporal Granger causality exists between these two variables only for sub-samples that include the Great Depression. For the other sub-sample periods as well as for the entire sample period no relationship exists between these variables.