Housing and the Korean economy

This paper explores the nexus between housing and the Korean economy. It starts with an overview of the size, growth, and volatility of residential investment in conjunction with long-term resource allocation and short-term macroeconomic fluctuations. Then, the evolution of housing finance and its implications for recent house price run-up are discussed. The relationships among housing price, consumer spending, and inflation are also investigated. Particular attention is paid to the debate over house price bubbles, housing wealth effects on consumption, and the causality between house price and inflation. The paper concludes with a brief assessment of government intervention to stabilize house prices. (C) 2004 Elsevier Inc. All rights reserved.