How common are soft landings? If a soft landing is defined as a relatively small reduction in the investment rate,they are not especially common. There have been only four cases where the decline in per capita residentialinvestment has been smaller than one third of the increase that occurred during the boom years (these are the Netherlands after 1978, Belgium after 1990, the United Kingdom after 1998 and Finland after 2000).
Soft landings are more common if they are defined as gradual declines, i.e. where it takes at least three years to hit the trough. Therehave been around 20 of these.
But all were comparatively deep declines. If a soft landing is defined as something that is both mild and gradual, there has not been a single case out of the 49 boom-bust cycles.
Source: Rae and van den Noord (2006).
The downturn that follows is usually rapid. On average in the first year after the peak, 40% of the increase during the trough to peak upswing is reversed, with another 40% lost in the second year.
Investment stabilises at that level for two years, before beginning to recover about five years after the peak. The spill-over effects to real activity are typically large. GDP growth declines sharply such that the output gap falls by nearly 4 percentage points from peak to trough in the years following the construction downturn. On average, the fiscal balance worsens by 2½ percentage points of GDP and the unemployment rate rises by 2½ percentage points.
Surprisingly, a tightening of monetary policy is not always the trigger for the end of a construction boom. Of the 34 booms for hich there is also data on short-term interest rates, monetary policy tightened before the investment peak only in a little over half of all cases.
23 April 2007 ECONOMICS DEPARTMENT
oecd[Modificato da pax2you 22/05/2008 11:49]