IMF Working Papers

Housing Booms and Productivity Growth

By Yuanchen Yang, Flora Lutz, Lucy Qian Liu

August 15, 2025

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Format: Chicago

Yuanchen Yang, Flora Lutz, and Lucy Qian Liu. "Housing Booms and Productivity Growth", IMF Working Papers 2025, 161 (2025), accessed August 22, 2025, https://doi.org/10.5089/9798229018548.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper investigates the nexus between persistent house price increases and productivity growth in Canada, focusing on the collateral channel. We first present a stylized model explaining the mechanism of the colleteral channel. Using detailed firm-level data spanning from 2000 to 2023, the empirical analysis finds a negative correlation between firm productivity and its real estate holdings. Furthermore, rising house prices dampen investment for firms with fewer tangible assets but stimulate investment for those with more. At the industry level, while overall productivity may increase with rising house prices on average, industries with significant tangible asset holdings exhibit an opposite trend, suggesting potential resource misallocation associated with persistent housing market boom.

Subject: Collateral, Economic theory, Financial institutions, House price indexes, Housing, Housing prices, Industrial productivity, Inflation, National accounts, Prices, Production, Productivity, Real estate prices, Supply elasticity

Keywords: Productivity, Article IV consultations, Australia, Caribbean, Collateral, Credit, Global, House price indexes, Housing, Housing boom, Housing prices, Industrial productivity, Inflation, Japan, Labor productivity, Misallocation, North America, Productivity, Real estate, Real estate prices, Sub-Saharan Africa, Supply elasticity

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