The House Rules: Housing Market Responses to Oil Price Shocks in Canada

Abstract

This paper estimates the response of house price indices in metropolitan areas across Canada to international oil price shocks. This is done to provide insight into differences in the relative responses of housing markets in Canada — particularly between those in oil-producing regions and those in regions less economically dependent on oil production. International oil price shocks are estimated at the international level as per Kilian (2009), and the respective housing market responses are computed with Jorda` (2005)’s local projection method. Results support the notion that regions respond heterogeneously to oil price shocks. There is also some indication that responses vary based on whether the oil price shock is induced by a shock to the global supply of oil, global demand for commodities, or the precautionary demand for oil.